Review question 2

The concept of present value relates to the idea that

• The discount rate is always higher when you invest now than in the future

• The discount rate is always higher when you invest in the future than now

• The money you have now is worth less today than an identical amount you would receive in the future

• The money you have now is worth more today than an identical amount you would receive in the future

The formula for calculating future value (FV) is

• FV = PV/(1+r)^n

• FV = PV/(1+r)*n

• FV = PV x (1+r)^n

• FV = PV x (1+r)*n

What is a par value of a bond?

• The amount borrowed by the issuer of the bond and returned to the investors when the bond matures

• The overall return earned by the bond investor when the bond matures

• The difference between the amount borrowed by the issuer of bond and the amount returned to investors at maturity

• The size of the coupon investors receive on an annual basis

When the price of a bond is above the face value, the bond is said to be

• Trading at par

• Trading at a premium

• Trading at a discount

• Trading below par

Which of the following is true when a bond is trading at a discount?

• Coupon Rate > Current Yield > Yield to Maturity

• Coupon Rate < Current Yield < Yield to Maturity

• Coupon Rate = Current Yield = Yield to Maturity

• Coupon Rate < Current Yield = Yield to Maturity

Primary market is known

• Capital market

• Money market

• Financial market

• New issue market

Financial assets include

• Bonds

• Stocks

• Treasury bills

• All of the above

Which of the following is not money market instrument?

• Treasury bills

• CDs

• Repos

• Stocks

Who can invest in money market instruments?

• Banks

• Mutual funds

• Insurance companies

• All of the above

Money market is the market for

• Short-term funds

• Medium-term funds

• Long-term funds

• All of the above