..ll AT&T; 12:10 AM @ 63% - × 300 Final MOCK Sp 17.pdf Name Class Dale: Final Mo

Question

..ll AT&T; 12:10 AM @ 63% - × 300 Final MOCK Sp 17.pdf Name Class Dale: Final Mock 18. The payment made each period on an amortized loan is constant, and it consists of some inmerest and some principal The closer we are to the end of the loan's life, the greater the percentage of the payment that will be a repayment of principal. a. True b. False 19. A bond has a $1,000 par valuc, makes annual interest paymemts of $100, has 5 years to maturity, cannot be called, and 15 not expected to default The bond should sell at a premium if market interest rates are below 10% and at adisou if interest rates are grater than 10%. a. Truc b. False 20. If the Treasury yield curve were downwaed sloping, the yield to maturity on a 10-year Treasuy coupon bond would be higher than that on a 1-year T-bill a. True b. False 21. The tighner the probability distribution of its expected future retums, the greater the risk of a given investment as measured by its standard deviation a. True b. False 22 Bocause short-term intcrest rates are much more volatilethan long-term rates, yos would, in the real world, gencrally be subject to much more price risk if you purchased a 30-day bond than if you bought a 30-year bond a. Truc b. False 23. If we are given a periodic interest rate, say a moethly rate, we can find the nominal annual rate by multiplying the periodie rate by the number of periods per year . True b. False 24. If ivestors expect a zero rate of inflation, then the nominal rate of retum on a very short-term U.S. Treasury bond should be equal to the real risk-free rane,r a. True b. False 25. Private markets are those like the NYSE, where transactions are handled by members of the oeganization, while publie markets are those like the NASDAQ, where anyone can make transactions a. Truc b. False 26 The NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive projects, will lead so different acceptreject decisions and thus capital budgets if the cost of capital at which the peojects' NPV profiles cross is greater than the crossover rate True Copyrigt Cengage Leaming Poed by Cogner Page 3 Open With Print

Explanation / Answer

18. True

because, it is general calculation that interest is more intially and as the loan moves towards closure principal payment increases

19. True

because, selling can be done at premium when interest rates are below 10% and vice versa

20. False

The yield on a 10-year bond would be less than that on a 1-year bill

21. False

It should be opposite; the tighter the probability distribution of expected future returns the smaller the risk of a given investment as measured by both the variance and the standard deviation

22. False

becasue, more the time lesser is the risk

23. True,

this is the basic calculation

24. True,

zero rate of inflation certainly reduces risk

25. False

Transactions can be made by registered members at either exchange

26. False

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