BUS 405 Week 3 Chapter 9 Interest Rates

This work of BUS 405 Week 3 Chapter 9 Interest Rates includes:

1. Which one of the following is the interest rate that the largest commercial banks charge their most creditworthy corporate customers for short-term loans?

2. Which one of the following terms applies to a rate that serves as an indicator of future trends?

3. Which one of the following rates is the rate that banks charge each other for overnight loans of $1 million or more?

4. Which one of the following rates is the rate a commercial bank must pay the Federal Reserve to borrow reserves overnight?

5. Which one of the following rates is used by brokerage firms as the basis for determining margin loan rates?

6. Which one of the following is unsecured debt issued by corporations on a short-term basis?

7. A $100,000 or more term deposit at a bank is called which one of the following?

8. Which one of the following describes a banker's acceptance?

9. Which one of the following is defined as U.S. dollar-denominated deposits held in a foreign bank?

10. Which one of the following abbreviations is the interest rate that international banks charge one another for overnight Eurodollar loans?

11. Which one of the following is a short-term debt instrument issued by the U.S. Treasury?

12. A pure discount security is an interest-bearing asset that pays:

13. Which one of the following is a basis point?

14. Which one of the following is the method used to quote interest rates on money market instruments?

15. The Treasury yield curve is a graph which plots Treasury yields against which one of the following?

16. Which one of the following is defined as the relationship between the interest rate on default-free, pure discount bonds and the time to maturity?

17. Pure discount bonds which are created by separating the interest and principal payments from U.S. Treasury bonds are called U.S. Treasury:

18. Which one of the following rates is the normally quoted rate?

19. Which one of the following best describes a real interest rate?

20. Which one of the following best describes the Fisher hypothesis?

21. Which one of the following theories states that the term structure of interest rates reveals the financial market's projections of future interest rates?

22. Which one of the following is defined as a forward rate?

23. Which one of the following proposes that lenders must be financially rewarded for loaning funds on a long-term versus a short-term basis?

24. The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?

25. U.S. Treasury bill rates were the highest during which one of the following time periods?

26. Which one of the following statements is correct concerning U.S. Treasury bill rates for the period 1800 - 2007?

27. Banks are most apt to quote short-term loan rates as:

28. Which one of the following rates is generally considered the bellwether rate for bank loans to business firms?

29. City Bank needs a one-day reserve loan of $2.6 million from Country Bank. Which one of the following interest rates will be charged on this loan?

30. First Bank needs to borrow money overnight from the Federal Reserve in order to meet its reserve requirements. Which one of the following interest rates will be charged on this loan?

31. Which one of the following actions is the Federal Reserve most likely to take if it is concerned about a slowing economy?

32. The rate which an investor pays a brokerage firm for a margin loan is based on a negotiated premium which is added to which one of the following rates?

33. Assume that a large corporation, such as General Electric, needs money in the short-term. Which one of the following securities is that corporation most likely to issue to meet this need?

34. Which one of the following statements is correct concerning large-denomination certificates of deposit?

35. Which one of the following facilitates international trade?

36. You notice that the interest rate on your credit card is set at LIBOR plus 8.9 percent. Given this, the rate you will pay is primarily influenced by the money market rates in which one of the following?

37. Which one of the following is the largest market in the world for new debt securities with maturities of one year or less?

38. The overnight repurchase rate is the rate charged on overnight loans which are collateralized by which one of the following securities?

39. Which one of the following features applies to a U.S. Treasury bill?

40. The market rate on a bond fell from 8.76 percent to 8.73 percent. This is a decline of how many fbasis points?

41. Which one of the following is correct when computing the price of a debt security when using a discount yield?

42. Which of the following will increase the price of a money market instrument computed using a discount yield?

I. increase in discount yield

II. decrease in discount yield

III. increase in days to maturity

IV. decrease in days to maturity

43. Which one of the following is used by Treasury dealers to indicate the price they are willing to pay to purchase a Treasury bill?

44. Which one of the following statements is correct concerning a Treasury bill?

45. The bond equivalent yield adjusts for leap years by using 366 days starting with:

46. Money market rates are generally one or the other of which two rates?

47. Consider a money market instrument with 48 days to maturity and a quoted ask price of 99. Which two of the following statements are correct as they relate to this instrument?

I. The bond equivalent yield is an effective annual rate.

II. The bank discount rate is lower than the bond equivalent yield.

III. The bank discount rate is an effective annual rate.

IV. The bond equivalent yield is lower than the effective annual rate.

48. Which two of the following are the largest categories of fixed-income securities in the U.S.?

49. Which one of the following borrowers will pay the rates depicted on a Treasury yield curve?

50. Which of the following statements are true as applied to U.S. agency debt?

I. It is equally as risky as Treasury debt.

II. It is frequently subject to state taxes.

III. It has the same credit guarantee as U.S. Treasury debt.

IV. It generally has a lower yield than U.S. Treasury debt with the same maturity.

51. Which one of the following applies to "Yankee bonds"?

52. Which one of the following statements is correct?

53. Treasury STRIPS are:

54. The approximate nominal interest rate is computed as the real rate:

55. Which one of the following statements is correct?

56. Which one of the following debt instruments guarantees investors a positive real rate of return?

57. Inflation-indexed Treasury securities:

I. adjust the principal amount on an annual basis.

II. are default-free.

III. offer a positive real rate of return.

IV. have a variable coupon rate.

58. Based on expectations theory, the term structure of interest rates will be _____ anytime investors believe that interest rates will be higher in the future than they are today.

59. The variable f1,1 as used in the expectations theory is interpreted as the forward rate for one year:

60. According to the expectations theory and the Fisher hypothesis, a downward-sloping term structure is indicative of which of the following based on market expectations?

I. nominal interest rates are expected to increase

II. nominal interest rates are expected to decline

III. inflation rates are expected to increase

IV. inflation rates are expected to decrease

61. Which of the following statements are true?

I. Lenders have a preference for shorter maturities.

II. Lenders have a preference for longer maturities.

III. Borrowers have a preference for shorter maturities.

IV. Borrowers have a preference for longer maturities.

62. Based solely on the maturity preference theory, long-term interest rates:

63. Which one of the following statements concerning the modern fixed-income market is correct?

64. Which of the following comprise the nominal interest rate on default-free securities according to the modern view of the term structure of interest rates?

I. liquidity premium

II. real rate

III. interest rate risk premium

IV. inflation premium

65. Modern term structure theory supports the contention that the term structure of interest rates will:

66. You want to purchase a security that will pay you $1,000 six years from now. If you want to earn an annual nominal rate of 7.5 percent, how much should you pay for this investment today?

67. You invest $3,600 today at a nominal annual rate of 5.5 percent. This investment will pay one payment five years from now. What will be the amount of that payment?

68. An investment will make one payment of $24,000 eleven years from now. What is the current value of this investment if the nominal rate of return is 5.8 percent?

69. A $1,000 face value, 120-day bond is quoted at a bank discount yield of 3.38 percent. What is the current bond price?

70. A bond has a face value of $20,000 and matures in 62 days. What is the bank discount yield if the bond is currently selling for $19,792.30?

71. A $5,000 face value bond is quoted at a bank discount yield of 2.8 percent. What is the current value of the bond if it matures in 36 days?

72. A $50,000 face value bond matures in 68 days and has a bank discount yield of 4.5 percent. What is the current value of the bond?

73. A Treasury bill has 21 days to maturity and a bank discount yield of 1.89 percent. What is the bond equivalent yield?

74. A Treasury bill is quoted at a bank discount yield of 1.08 percent and has 12 days to maturity. What is the bond equivalent yield given that this is a leap year?

75. What is the bond equivalent yield on a 30-day Treasury bill that has a bank discount yield of 2.01 percent?

76. A Treasury bill has a face value of $200,000, an asked yield of 2.12 percent, and matures in 28 days. What is the price of this bill?

77. A Treasury bill has a face value of $100,000, a price of $99,797.12, and matures in 35 days. What is the asked yield?

78. A Treasury bill has a face value of $50,000, an asked yield of 2.87 percent, and matures in 31 days. What is the price of this bill?

79. Your credit card has an annual percentage rate of 18.9 percent and compounds interest daily. What is the effective annual rate?

80. A Treasury bill matures in 73 days and has a bond equivalent yield of 4.18 percent. What is the effective annual rate?

81. A Treasury bill matures in 81 days and has a bond equivalent yield of 2.79 percent. What is the effective annual rate?