A balloon payment is one that A) is paid at the outset of a loan. B) is usually the last installment payment and generally for an amount much greater than the other monthly payments. C) includes all interest on the loan paid in advance. D) is a “floating” payment, meaning the lender can demand its […]
Date: September 19th, 2020
Cash serves as a relative liquid short-term store of value. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Leigh Delight Candy, Inc is choosing between two bonds in which to invest their cash. One is being offered from Hershey’s and will mature in 10 years and pay $30 each quarter. The other alternative is a Mars’ bond that will mature in 20 years and pay $30 each quarter. What would be the present […]
Date: September 19th, 2020
The current rate of return on a one-year U.S. Government security is 3%. The rate of return on a two-year U.S. Government security is 5%. According to the expectations theory, what is the return on a one-year U.S. Government security purchased one year from today? ANSWER $1,000 × 1.03 = $1,030 at the […]
Date: September 19th, 2020
A bond will pay $5,000 at maturity in 9 years. It also makes semiannual interest payments of $400 until maturity. If the discount rate is 7% compounded semiannually, what should be the market price of the bond? What will be an ideal response? ANSWER $7,967.68
Date: September 19th, 2020
Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond. Assume a liquidity premium of 8 basis points. Identify as part of your answer the inflation risk premium, the default risk premium, the maturity premium, and the liquidity premium. 3-month T-bills 2.0% 30-year Treasury bonds 5.0% AA-rated corp. […]
Date: September 19th, 2020
In a general partnership, each partner is liable for the partnership’s obligations only up to the percentage of the obligation equal to that partner’s percentage of ownership in the partnership. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
An investor buys a 20-year Bbb-rated corporate bond with a nominal annual rate of return of 10%. The average inflation rate is expected to be 2%. The default risk premium is expected to be 5% and the maturity premium is 4%. Calculate the real rate of interest. ANSWER krf = k* + IRP […]
Date: September 19th, 2020
The add-on clause on a consumer loan A) allows you to add on additional loans at the existing rate on your current loans. B) allows the creditor to add on additional interest when the market rate of interest rises. C) allows the lender to repossess all goods purchased with the original loan even though your […]
Date: September 19th, 2020
Frank Zanca is considering three different investments that his broker has offered to him. The different cash flows are as follows: End of Year A B C 1 300 400 2 300 3 300 4 300 300 600 5 300 6 300 7 300 8 300 600 Because Frank only has enough savings for one […]
Date: September 19th, 2020
