Explain why you got your answer.

Bread would not function very well as money because bread fails as as a

standard of deferred payment

store of value

unit of account

The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a consequence of the fact that

precious metals were difficult to carry and transport.

paper is more costly to produce than precious metals.

paper money is less accepted than checks.

Alice borrows 20,000 to purchase a vehicle. She will make fixed payments for three years to pay back the loan. Suppose the yield to maturity of the loan is 6%. What is the value of herannualpayment?

$6666.67

$7482.23

$7070.64

$7206.95

Price a discount bond with yield to maturity of 5%, 10 years to maturity and face (par) value of $100.

$74.73

$61.39

$105

$67.56

Price a discount bond with yield to maturity of 2%, 20 years to maturity and face (par) value of $100.

$67.29

$102

$74.73

$95.53

An annual coupon bond has coupon rate of 5%, face value of $100 and maturity of 20 years. Yield to maturity is 6%. The price of this bond is

less than $100

cannot be determined.

equal to $100

Which of the following are generally TRUE of all bonds?

The longer a bond's maturity, the greater is the rate of return that occurs as a result of the increase in the interest rate.

Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise.

Prices and returns for short-term bonds are more volatile than those for longer term bonds.

Which of the following are generally TRUE of bonds?

A rise in interest rates is associated with a fall in bond prices, resulting in capital gains on bonds whose terms to maturity are longer than the holding periods.

A bond's return equals the yield to maturity when the time to maturity is the same as the holding period.

Prices and returns for short-term bonds are more volatile than those for longer-term bonds.

A factor that could cause the demand for bonds to decrease is

an increase in wealth.

a decrease in the expected return on bonds relative to other assets.

a reduction in the riskiness of bonds relative to other assets.

A factor that could cause the supply of bonds to shift to the right is

a decrease in government budget deficits.

firm expect and increase in economic growth.

a decrease in expected inflation.

A flat yield curve

is the most common shape of yield curve.

is uncommon.

According to the expectations theory of the term structure, the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond.

difference

multiple

average

The segmented markets theory can explain

why yield curves tend to slope upward when short-term interest rates are low and to be inverted when short-term interest rates are high.

why yield curves usually tend to slope upward.

why interest rates on bonds of different maturities tend to move together.

If 1-year interest rates for the next three years are expected to be 1, 1, and 1 percent, and the 3-year term premium is 1 percent, than the 3-year bond rate will be

1 percent.

2 percent.

4 percent.

When short-term interest rates are expected to fall sharply in the future, the yield curve will

be flat.

slope up.

be inverted.

Analysis of adverse selection indicates that financial intermediaries, especially banks

have advantages in overcoming the free-rider problem, helping to explain why indirect finance is a more important source of business finance than is direct finance.

must buy securities from corporations to diversify the risk that results from holding non-tradable loans.

despite their success in overcoming free-rider problems, nevertheless play a minor role in moving funds to corporations.