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TRUE

TRUE

TRUE

TRUE

TRUE

FALSE

TRUE

TRUE

TRUE

FALSE

TRUE

rise, decline

### The market value of any real or financial asset, including stocks, bonds, or art work purchased in hope of selling it at a profit, may be estimated by determining _____________ and then discounting them back to the _____________.

future cash flows, present

greater, below

### A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par (\$1,000). Which of the following statements is CORRECT?

a. The bond's expected capital gains yield is zero.

### Which of the following bonds would have the greatest percentage increase in value if all interest rates in the economy fall by 1%? a. 10-year, zero coupon bond. b. 20-year, 10% coupon bond. c. 20-year, 5% coupon bond. d. 1-year, 10% coupon bond. e. 20-year, zero coupon bond.

e. 20-year, zero coupon bond.

903.04

7.14%

\$1,105.69

\$930.11

### If we are given a periodic interest rate, a monthly rate for example, we can find the nominal annual rate by ____________ the __________ rate by the _______________.

Multiplying, periodic rate, the number of periods per year.

6/4
1.5%, 6%

### The "yield curve" shows the relationship between bonds' ______________ and their____________.

maturities, yields

lower

decrease

(4+6+7)/3
=5.67%

3.05+2.5 = 5.80%

= (1+Inom/M)^M-1

Example: