1. Considering time value of money, using an interest rate that is lower than the actual will
A-Increase the present value of $1,000 that will be received 10 years later.
B-Increase the future value of$1,000 that will be invested now
C-Decrease the present value of $1,000 that will be received 10 years later
D-None of the above
2. The present value of an outstanding bond will increase if the market interest rate increase
A-True
B-False
3. If you buy a callable bond and after your purchase the market interest rate decrease, then the bond is more likely to be called
A-True
B-False
4. If interest rates decrease after a bond issue, then bond’s price will decrease
A-True
B-False
5. Which of the following would ne most likely to increase the interest rates?
A-Firms increase their investment and expansion plans.
B-Foreign countries reduce their level of investment in the US.
C-The expected level of inflation decreases
D-The economy fall into a recession
E-None of the above
6. Which of the following statements is true of the time value of money?
A-It means a dollar received today is worth less than a dollar received tomorrow
B-it assumes that inflation rate remains constant for the foreseeable future.
C-It refers to the fact higher cash flow in earlier years are less desirable
D-it is based on the assumption that people prefer to consume things at some time in the future
7. The Value of a dollar invested at a positive interest rate grows over time.
A-True
B-False
8. For corporate bonds, the higher the inflation premium, the ____________ will be the quoted interest rate.
A-higher
B-lower
C-none pf the above