QUESTION 4 Sarah just graduated from college and is about to open her own company. Which of the statements below best represents a main concern Sarah might have? a. She is most likely to be a lender concerned mostly about the nominal interest rate she will earn b. She would be concerned only with whether inflation was greater than or less than the nominal rate of interest based on the Fisher equation. c. She is most likely to be a lender concerned mostly about the real interest rate she will carn. d. She is most likely to be a borrower concemed mostly about the return on investment she will pay, e She is most likely to be a borrower concerned mostly about the nominal interest rate she will pay, QUESTIONS Assume you put money into an asset that pays you 10% interest and assume that inflation is 4%. Which statement is correct? a. The nominal rate of interest is 10% and the real rate is 4%. b. The real rate of interest is 6% The textbook states that all interest rates would be assumed to be real rates, thus, the nominal rate is 14% d. If the rate of inflation falls, your real rate of interest from this asset would also fall. e. The nominal rate of interest is 40% QUESTION 6 An example of a financial intermediary is a a. bank. b. financial market. c. bond market. d: stock market. e. security market QUESTION 7 What does a bond represent? a. a market in which securities are traded after their first sale b. a private firm that accepts deposits and extends loans c. a debt to be paid by the bond issuer d. a security that bundles separate loan agreements e. ownership in a firm QUESTION 8 The face value of a bond is the a. price of the bond at purchase. b. value of the bond at maturity, or the amount due at repayment. c. price of the bond at purchase minus the face value of the bond. d. value of the bond at maturity plus the price of the bond at purchase. e. value of the bond at maturity minus the price of the bond at purchase. QUESTION 9 b. R- The equation for calculating the interest rate of a bond is face value + initial price . face price face value + initial price initial price face value - initial price. initial price face value - initial price face price e. R-face value - initial price: C.R=