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6 If the nominal interest rate per year is 10 percent and the inflation rate is 4 percent, what is the real rate of interest?
6
If the nominal interest rate per year is 10 percent and the inflation rate is 4 percent, what is the real rate of interest?
a. 10.0 percent
b. 4.1 percent
c. 5.8 percent
d. 14.0 percent
7
As CFO of your corporation, you would prefer (all else equal) to see the price of your corporation's bonds
a. increase, indicating that bond investors view your firm as less risky.
b. decrease, indicating that bond investors view your firm as less risky.
c. increase, indicating that bond investors view your firm as more willing to take risks.
d. decrease, indicating that bond investors view your firm as more willing to take risks.
8
The duration of any bond is the same as its maturity.
True
False
9
If the term structure of interest rates is flat, then the 9-year spot interest rate equals the 10-year spot interest rate.
True
False
10
U.S. Treasury bonds have almost zero default risk but are subject to inflation risk.
True
False
11.
Corporate bond yields are generally higher than government bond yields for bonds having the same coupon rate and maturity.
True
False
12.
A U.S. Treasury "strip" is a zero-coupon bond.
True
False