Reference no: EM132685920

1. Which is not a factor that could impact interest rate levels?

a. Federal budget deficits

b. Level of business activity

c. Federal Reserve policy

d. Stock market returns

2. A Bank says it pays 2% on a certificate of deposit and B Bank pays 2.33%, with the same maturity date and term period (both FDIC insured). As an investor you would:

a. Invest in B bank

b. Invest in A Bank

c. Ask what the inflation premium is

d. Ask about how the rate is compounded

3. T-Bills are currently paying 2.5%. The inflation rate is @ 2.0%. The real return earned by investors is:

a. 3.50%

b. 0.50%

c. -0.50%

d. 4.50%

4. The pure expectations theory states?

a. Investors can predict the default rate on bonds and sell them in advance

b. The risk free rate of return depends on inflation and other risk premiums

c. The yield on bonds automatically adjusts to new company information

d. The yield curve shows what interest rates are expected to be in the future

5. Which type of bond is backed up by the value of an asset?

a. AAA-rated debt

b. Mortgage bonds

c. Subordinated debt

d. Treasury bonds