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EconomicsofMoney,Banking,andFinancialMarkets,11e,Global(MEdiisthikoinn)Chapter4 TheMeaningofInterestRates
MeasuringInterestRates
Theconceptof isbasedonthecommon-sensenotionthatadollarpaidtoyouinthefutureislessvaluabletoyouthanadollartoday.
presentvalue
futurevalue
interest
deflationAnswer: A
AACSB: ApplicationofKnowledge
Thepresentvalueofanexpectedfuturepayment astheinterestrateincreases.
falls
rises
isconstant
isunaffectedAnswer: A
AACSB: ReflectiveThinking
Anincreaseinthetimetothepromisedfuturepayment thepresentvalueofthepayment.
decreases
increases
hasnoeffecton
isirrelevanttoAnswer: A
AACSB: ReflectiveThinking
Withaninterestrateof6percent,thepresentvalueof$100nextyearisapproximatelyA)$106.
B)$100.
C)$94.
D)$92.
Answer: C
AACSB: AnalyticalThinking
Whatisthepresentvalueof$500.00tobepaidintwoyearsiftheinterestrateis5percent?A)$453.51
B)$500.00
C)$476.25
D)$550.00
Answer: A
AACSB: AnalyticalThinking
Ifasecuritypays$55inoneyearand$133inthreeyears,itspresentvalueis$150iftheinterestrateis
5percent.
10percent.
12.5percent.
15percent.
Answer: B
AACSB: AnalyticalThinking
Toclaimthatalotterywinnerwhoistoreceive$1millionperyearfortwentyyearshaswon
$20millionignorestheprocessof
facevalue.
parvalue.
deflation.
discountingthefuture.Answer: D
AACSB: AnalyticalThinking
Acreditmarketinstrumentthatprovidestheborrowerwithanamountoffundsthatmustberepaidatthematuritydatealongwithaninterestpaymentisknownasa
simpleloan.
fixed-paymentloan.
couponbond.
discountbond.
Answer: A
AACSB: ApplicationofKnowledge
Acreditmarketinstrumentthatrequirestheborrowertomakethesamepaymenteveryperioduntilthematuritydateisknownasa
simpleloan.
fixed-paymentloan.
couponbond.
discountbond.
Answer: B
AACSB: ApplicationofKnowledge
WhichofthefollowingareTRUEoff
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