| Name: | Chapter04HWK-Suppl |
| Due: | 06/20/22 11:59pm |
| Last Worked: | 06/18/22 6:49am |
| Current Score: | 100% (16 points out of 16) |
| Attempts: | Unlimited per question |
| Late Submission Penalty | 10 % per day deducted from final score |
- Questions: 16
- Scored: 16
- Correct: 16
- Partial Credit: 0
- Incorrect: 0
If the interest rate is
15%,
what is the
present value
LOADING…
of a security that pays you
$1,125
next year,
$1,210
the year after, and
$1,343
the year after that?
A lottery claims its grand prize is
$10
million, payable over
5
years at
$2,000,000
per year. If the first payment is made immediately, what is the grand prize really worth? Use an interest rate of
6%.
The real value of the grand prize is
$89302118930211.
(Round your response to the nearest dollar.)
A lottery claims its grand prize is
$20
million, payable over
5
years at
$4,000,000
per year. If the first payment is made immediately, what is the grand prize really worth? Use an interest rate of
5%.
The real value of the grand prize is
$1818380218183802.
(Round your response to the nearest dollar.)
If interest rates decline, which would you rather be holding, long-term bonds or short-term bonds?
Part 2
A.
Long-term bonds because their price is likely to fall
B.
Short-term bonds because their price would increase more than the price of long-term bonds
C.
Short-term bonds because their price is less sensitive to interest-rate volatility
D.
Long-term bonds because their price would increase more than the price of short-term bonds
The ________ interest rate is adjusted for expected changes in the price level.
Question content area bottom
Part 1
A.
ex ante real
B.
ex ante nominal
C.
ex post real
D.
ex post nominal
The ________ interest rate more accurately reflects the true cost of borrowing.
Question content area bottom
Part 1
A.
discount
B.
nominal
C.
real
D.
market
The nominal interest rate minus the expected rate of inflation
Question content area bottom
Part 1
A.
defines the real interest rate.
B.
is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate.
C.
defines the discount rate.
D.
is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate.
When the ________ interest rate is low, there are greater incentives to ________ and fewer incentives to ________.
Question content area bottom
Part 1
A.
market; lend; borrow
B.
nominal; lend; borrow
C.
real; borrow; lend
D.
real; lend; borrow
The interest rate that describes how well a lender has done in real terms after the fact is called the
Question content area bottom
Part 1
A.
ex post real interest rate.
B.
ex ante nominal interest rate.
C.
ex post nominal interest rate.
D.
ex ante real interest rate.
The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.
Question content area bottom
Part 1
A.
Keynesian equation
B.
Fisher equation
C.
Monetarist equation
D.
Marshall equation
If the nominal rate of interest is 2 percent, and the expected inflation rate is
−10
percent, the real rate of interest is
Question content area bottom
Part 1
A.
2 percent.
B.
8 percent.
C.
10 percent.
D.
12 percent.
In which of the following situations would you prefer to be the borrower?
Question content area bottom
Part 1
A.
The interest rate is 4 percent and the expected inflation rate is 1 percent.
B.
The interest rate is 13 percent and the expected inflation rate is 15 percent.
C.
The interest rate is 9 percent and the expected inflation rate is 7 percent.
D.
The interest rate is 25 percent and the expected inflation rate is 50 percent.
How much is
$250
to be received in exactly one year worth to you today if the interest rate is
15%?
The value today is
$enter your response here.
(Round
your response to the nearest
penny.)
This problem makes use of the information in the document MyLabGerlowski0004.docx. A link is available here:
https://ubalt-my.sharepoint.com/:w:/g/personal/ntsbgerl_ubalt_edu/Eez4uI7mlkpGhkHSYWDL4w4BLxWEWuTdt3p0cu9I56h5Lw?e=ZyR56n
You may need to be logged into a UBALT account to access it, you will also find it available in the Sakai course site in the lessons sectino under the lesson “MyLabThings”. The document shows the logic and context of an estimation you have seen before in the class materials provided for your review of Chapter 04. The regression presented is
regression DGS2 = B0 + B1*Infl-Rate Which of the following best characterizes the results presented here?