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WorksheetsC2-thị trường định chế
Total questions: 25
Worksheet time: 15mins
1. The yield to maturity is always equal to the simple interest rate on a simple loan.
True
False
2. A bond with a higher default risk will always have a lower yield to maturity than a default-free bond of the same maturity.
True
False
3. According to the expectations theory, the interest rate on a long-term bond is equal to the average of current and expected future short-term interest rates.
True
False
4. Municipal bonds usually have higher yields than U.S. Treasury bonds due to their lower liquidity and default risk.
True
False
5. The Fisher equation states that the nominal interest rate is equal to the real interest rate plus expected inflation.
True
False
6. Which of the following best describes the concept of present value?
The value of money increases over time due to inflation.
A dollar received in the future is worth more than a dollar today.
The value of future cash flows discounted to the present at a given interest rate.
The total amount of interest earned over time.
7. What happens to bond prices when interest rates rise?
Bond prices increase.
Bond prices decrease.
Bond prices remain unchanged.
It depends on the bond’s maturity.
8. Which type of bond does NOT make periodic interest payments?
Coupon bond
Discount bond
Fixed-payment loan
Convertible bond
9. What is the primary reason yield curves are usually upward-sloping?
The expectations theory
The liquidity premium theory
The market segmentation theory
The risk structure of interest rates
10. What happens when the default risk on a corporate bond increases?
The bond’s interest rate decreases.
The demand for the bond increases.
The bond’s price falls, and its yield rises.
The bond becomes more attractive to risk-averse investors.
11. What is the risk premium on a corporate bond?
The additional interest required to compensate for inflation.
The difference between a corporate bond’s yield and a default-free bond’s yield.
The cost of issuing a bond in the primary market.
The tax benefits associated with municipal bonds.
12. Which theory of the term structure assumes bonds of different maturities are not substitutes?
Expectations theory
Market segmentation theory
Liquidity premium theory
Fisher effect theory
13. Which of the following is NOT a factor affecting the risk structure of interest rates?
Default risk
Liquidity
Income tax considerations
The Fisher equation
14. If the expected inflation rate increases, what happens to the real interest rate, assuming the nominal rate remains unchanged?
It increases.
It decreases.
It remains the same.
It becomes negative.
15. Which factor explains why municipal bonds typically have lower yields than Treasury bonds?
Lower risk of default
Higher liquidity
Tax-exempt status
Higher interest rates
Calculate the present value of $1,000 received in 5 years if the discount rate is 6%.
(a)
A bond has a face value of $1,000, a coupon rate of 8%, and a price of $950. What is the current yield?
(a)
If a discount bond has a face value of $1,000 and is selling for $920, what is its yield to maturity?
(a)
If the nominal interest rate is 7% and expected inflation is 2%, what is the real interest rate?
(a)
What is the price of a one-year discount bond with a face value of $1,000 and a yield of 5%?
(a)
Which of the following statements about the expectations theory is INCORRECT?
It assumes that bonds of different maturities are perfect substitutes.
It explains why interest rates on bonds of different maturities tend to move together.
It explains why the yield curve is always upward sloping.
It states that the interest rate on a long-term bond is the average of expected future short-term rates.
Suppose the one-year interest rate today is 4%, and the one-year rate one year from now is expected to be 6%. According to the expectations theory, what is the two-year bond yield today?
4.5%
5%
5.5%
6%
A zero-coupon bond with a face value of $1,000 is currently selling for $850. If the bond matures in 3 years, what is its yield to maturity (YTM)?
5.55%
6.23%
7.22%
8.45%
Which factor can cause a risk-free government bond to have a higher yield than a corporate bond with some default risk?
The corporate bond has high liquidity.
The government bond has tax advantages.
The corporate bond’s expected return is lower.
Investors expect a sharp increase in interest rates.
According to the liquidity premium theory, if investors expect short-term interest rates to remain constant in the future, what will the yield curve look like?
Flat
Upward-sloping
Downward-sloping
Unpredictable
