Quiz 1 Quiz 2 Quiz 3 Quiz 4 Quiz 5
Topic Quiz 1: Financial Assets & Interest Rates 10 questions · explanations appear as you answer
1. A bond is best described as: A A share of ownership in a company B A loan from the buyer to the issuer, paying fixed interest plus return of principal C A type of currency D A government tax
2. Bond prices and interest rates (yields) are related how? A They move in the same direction B They move in opposite directions C They are unrelated D They are always equal
3. A bond promises to pay $200 in one year. An investor buys it today for $180. What is the approximate yield? A 10% B 11.1% C 20% D 90%
4. Using the same bond (pays $200 in one year), if instead an investor pays $190 today, what is the approximate yield? A 5.3% B 10% C 20% D 95%
5. The nominal interest rate is: A Adjusted for inflation B The stated rate, not adjusted for inflation C Always higher than the real interest rate D Set only by private banks
6. The nominal interest rate is 7%, and expected inflation is 3%. What is the approximate real interest rate? A 10% B 4% C 3% D 7%
7. The nominal interest rate is 4%, and expected inflation is 5%. What is the approximate real interest rate? A 9% B 1% C -1% D 4%
8. Why does the real interest rate matter more than the nominal rate to savers and borrowers? A It reflects the true change in purchasing power after accounting for inflation B It is always a positive number C It is set directly by Congress D It has no practical relevance
9. A Certificate of Deposit (CD) is best described as: A A share of corporate ownership B A fixed-term deposit that pays a set interest rate for keeping funds in the bank for a set time C A type of government bond only D Physical currency
10. Which of the following is NOT considered a financial asset in this course? A A corporate bond B A share of stock C A pair of shoes D A Certificate of Deposit