Money,interest Rates,and Economic Activity
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- Economic Issues and ConceptsEconomic Theories,Data,and GraphsDemand,Supply,and PriceElasticityPrice Controls and Market EfficiencyConsumer BehaviourProducers in the Short RunProducers in the Long RunCompetitive MarketsMonopoly,cartels,and Price DiscriminationImperfect Competition and Strategic BehaviourEconomic Efficiency and Public PolicyHow Factor Markets WorkLabour Markets and Income InequalityInterest Rates and the Capital MarketMarket Failures and Government InterventionThe Economics of Environmental ProtectionTaxation and Public ExpenditureWhat Macroeconomics Is All AboutThe Measurement of National IncomeThe Simplest Short-Run Macro ModelAdding Government and Trade to the Simple Macro ModelOutput and Prices in the Short RunFrom the Short Run to the Long Run: The Adjustment of Factor PricesLong-Run Economic GrowthMoney and BankingMoney,Interest Rates,and Economic ActivityMonetary Policy in CanadaInflation and DisinflationUnemployment Fluctuations and the NairuGovernment Debt and DeficitsThe Gains From International TradeTrade PolicyExchange Rates and the Balance of Payments
Question 1
Free
Multiple Choice
Other things being equal,bond prices
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are unaffected by changes in the demand for money.
are unaffected by interest-rate changes.
vary directly with interest rates.
vary inversely with interest rates.
vary proportionally with interest rates.
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Question 2
Free
Multiple Choice
The present value of a financial asset is
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the most someone would be willing to pay upon maturity of the asset.
the most someone would be willing to pay today for the asset.
equivalent to the face value of the asset.
the amount someone would pay in the future to have the asset today.
the amount someone would pay in the future for the current stream of payments from the asset.
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Question 3
Free
Multiple Choice
The present value of a bond is determined by the
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face value and the date of maturity.
rate of inflation.
market rate of interest only.
market rate of interest,the date of maturity,and the face value.
marginal rate of income tax.
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Question 4
Free
Multiple Choice
If Robert expects interest rates to fall in the near future,he will probably be willing to
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buy bonds now,and hold less money.
buy bonds now,but only if their price falls.
sell bonds now,and hold less money.
put his money under his mattress rather than buy bonds.
maintain only the current holding of bonds.
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Question 5
Free
Multiple Choice
When Janet expects interest rates to rise in the near future,she will probably be willing to
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buy bonds now,and hold less money.
buy bonds now,but only if their price falls.
sell bonds now,and hold more money.
put her money under her mattress rather than in a bank account.
maintain only the current holding of bonds.
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Question 6
Multiple Choice
What is the present value of a bond that pays $121.00 one year from today if the interest rate is 10% per year?
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$100.00
$110.00
$121.00
$133.10
$221.00
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Question 7
Multiple Choice
When i is the annual interest rate,the formula for calculating the present value of a bond with a face value of R dollars,receivable in one year is
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PV = (1 + i)/R.
PV = i(R + i).
PV = R (1 + i).
PV = R/i.
PV = R/(1 + i).
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Question 8
Multiple Choice
If the annual market rate of interest is 5%,an asset that promises to pay $100 after each of the next two years has a present value of
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$90.70.
$95.24.
$181.40.
$185.94.
$200.00.
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Question 9
Multiple Choice
If the annual interest rate is 8%,an asset that promises to pay $160 after each of the next two years has a present value of
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$178.32.
$285.32.
$296.30.
$300.00.
$320.00.
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Question 10
Multiple Choice
If the annual interest rate is 10%,$5.00 received today has the same present value as
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$4.00 received one year from now.
$4.50 received one year from now.
$5.00 received one year from now.
$5.50 received one year from now.
$6.00 received one year form now.
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Question 11
Multiple Choice
If the annual interest rate is 3%,$10 000 received today has the same present value as ________ received one year from now.
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$10 000
$13 000
$300
$9707.74
$10 300
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Question 12
Multiple Choice
Consider a bond with a face value of $10 000,a three-year term and a coupon payment of 6% made at the end of each year.The face value of the bond is repaid at the end of the term.Which of the following equations will correctly calculate the present value of the bond?
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PV = 
+ 
+ 
+ + PV = 
+ 
+ 
+ + PV = 
+ 
+ 
+ + PV = 
+ 
+ 
+ + PV = 
+ 
+ 
+ + To unlock the question
Question 13
Multiple Choice
In a competitive financial market,the equilibrium price of an asset will equal the
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present value of the asset.
future value of the asset.
sum of present value of the asset multiplied by the interest rate.
future value of the asset multiplied by the interest rate.
issue price of the asset.
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Question 14
Multiple Choice
Consider a bond that promises to make coupon payments of $100 each year for three years (beginning in one year's time)and also repays the face value of $2000 at the end of the third year.If the market interest rate is 6%,what is the present value of this bond?
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$267.30
$283.02
$1763.22
$1854.67
$1946.53
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Question 15
Multiple Choice
Consider a bond that promises to make coupon payments of $100 each year for three years (beginning in one year's time)and also repays the face value of $2000 at the end of the third year.If the market interest rate is 4%,what is the present value of this bond?
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$288.45
$1866.67
$1941.57
$1966.39
$2055.50
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Question 16
Multiple Choice
When considering the present value of any financial asset that makes a stream of payments in the future,we know that if the market interest rate falls,
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the present value of the asset will rise.
the future value of the asset will rise.
the current value of the asset will fall.
the present value of the asset will fall.
the present value of the asset is unaffected.
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Question 17
Multiple Choice
Consider a Government of Canada bond with a face value of $1000,and a present value of $925.If this bond is offered for sale at $960,then
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the excess demand for the bond at $960 will drive the price up to the face value of the bond.
individuals will purchase the bond at the offer price which will drive the market rate of interest up.
individuals will purchase the bond at the offer price which will drive the market rate of interest down.
the equilibrium market price of this bond has been achieved.
the lack of demand for this bond will drive the price down until it reaches its equilibrium market price of $925.
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Question 18
Multiple Choice
Consider a Hydro Quebec bond with a face value of $1000,and a present value of $1175.If this bond is offered for sale at $1025,then
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excess supply of this bond will drive the price down until it reaches its face value.
individuals will purchase the bond at the offer price which will drive down the price further.
excess demand for this bond will drive the price up until it reaches its equilibrium market price of $1175.
the equilibrium market price of this bond has been achieved.
Hydro Quebec will be forced to change the face value of the bond.
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Question 19
Multiple Choice
If the current market price of a bond is less than the present value of the income stream the bond will produce,the price will ________ due to excess ________ of/for the bond.
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rise; supply
fall; supply
rise; demand
fall; demand
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Question 20
Multiple Choice
An analyst is considering the purchase of a Government of Canada bond that will pay its face value of $10 000 in one year's time,but pay no direct interest.The market interest rate is 4% and the bond is being offered for sale at a price of $9800.The analyst should recommend
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purchasing the bond because the buyer will earn a profit of $185.
purchasing the bond because the bond price is equal to its present value.
not purchasing the bond because the price is lower than its present value.
not purchasing the bond because the buyer could earn an additional $192 by investing the $9800 elsewhere.
not purchasing the bond because the buyer could earn an additional $392 by investing the $9800 elsewhere.
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