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Multiple Choice



This activity contains 20 questions.

Question 1.
The ______ rate of interest is the actual rate charged by the supplier and paid by the demander of funds.


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Question 2.
The ______ is the annual rate of interest earned on a security purchased on a given date and held to maturity.


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Question 3.
The ______ is/are a graphic depiction of the term structure of interest rates.


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Question 4.
The theory suggesting that for any given issuer, long-term interest rates tend to be higher than short-term rates is called:


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Question 5.
The three theories cited to explain the general shape of the yield curve are all of the following except:


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Question 6.
The cost of long-term debt generally ______ that of short-term debt.


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Question 7.
______ is secured by real estate.


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Question 8.
A debenture is:


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Question 9.
The major factor(s) affecting the cost, or interest rate, on a bond is (are) its:


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Question 10.
In the present value model, risk is generally incorporated into the:


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Question 11.
Bonds are:


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Question 12.
The value of a bond is the present value of the:


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Question 13.
When the required return is constant and equal to the coupon rate, the price of a bond as it approaches its maturity date will:


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Question 14.
The market price of outstanding bond issues often varies from par because:


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Question 15.
The price of a bond with a fixed coupon rate and the market required return have a relationship that is best described as:


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Question 16.
If the required return is less than the coupon rate, a bond will sell at:


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Question 17.
A firm has an issue of $1 000 par value bonds with a 12 per cent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning eight per cent, the firm's bond will sell for ______ today.


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Question 18.
If a corporate bond is issued with a coupon rate that varies directly with the required return, the price of the bond will:


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Question 19.
Interest rate risk and the time to maturity have a relationship that is best characterised as:


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Question 20.
For an investor who plans to purchase a bond maturing in one year, the primary consideration should be:


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