FIN 3500 MSU Interest Rates Types of Markets Nonbank Finance and Derivatives Questions Hello. I have 7 assignments that I need to do but I dont have time f

FIN 3500 MSU Interest Rates Types of Markets Nonbank Finance and Derivatives Questions Hello. I have 7 assignments that I need to do but I dont have time for all of those. So instead of posting them one by one I thought It’d be better to post all of them together and see if it works. I will attach it down below. I dont need the first assignment, Im done with that. I need the second one on June 2nd, third one on June 5th and the rest are June 9th Assignment #1
What is Money?
What do you think of when you think of money?
Write down whatever comes to your mind when
you think of money? Should stocks count as
money? What about cigarettes in prison?
Assignment #2: Understanding Interest Rates
(20 Questions)
1) Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.
2) What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?
A) $453.51
B) $550.00
C) $476.25
D) $550.00
3) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate is
A) 5 percent.
B) 10 percent.
C) 12.5 percent.
D) 15 percent.
4) If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest is
A) 2 percent.
B) 8 percent.
C) 10 percent.
D) 12 percent.
5) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a
A) simple loan.
B) fixed-payment loan.
C) coupon bond.
D) discount bond.
Assignment #2 Continued
6) The ________ interest rate more accurately reflects the true cost of borrowing.
A) nominal
B) real
C) discount
D) market
7) If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year is
A) $650.
B) $1,300.
C) $130.
D) $13.
8) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate of
A) 5 percent.
B) 8 percent.
C) 10 percent.
D) 40 percent.
9) When I purchase a 10 percent coupon bond, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then
my return on this asset is
A) 10 percent.
B) 8 percent.
C) 12 percent.
D) there is not enough information to determine the return.
10) The interest rate that equates the present value of payments received from a debt instrument with its value today is the
A) simple interest rate.
B) current yield.
C) yield to maturity.
D) real interest rate.
#2 Continued.
11) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount is
A) $1000.
B) $1210.
C) $2000.
D) $2200.
12) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid is
A) $10,030.
B) $10,300.
C) $13,000.
D) $13,310.
13) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate is
A) 5 percent.
B) 10 percent.
C) 22 percent.
D) 25 percent.
14) If a security pays $110 next year and $121 the year after that, what is its yield to maturity if it sells for $200?
A) 9 percent
B) 10 percent
C) 11 percent
D) 12 percent
15) The ________ of a coupon bond and the yield to maturity are inversely related.
A) price
B) par value
C) maturity date
D) term
#2 Cont.
16) A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity of
A) 8 percent.
B) 10 percent.
C) 12 percent.
D) 14 percent.
17) Which of the following bonds would you prefer to be buying?
A) A $10,000 face-value security with a 10 percent coupon selling for $9,000
B) A $10,000 face-value security with a 7 percent coupon selling for $10,000
C) A $10,000 face-value security with a 9 percent coupon selling for $10,000
D) A $10,000 face-value security with a 10 percent coupon selling for $10,000
18) If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is
A) 5 percent.
B) 10 percent.
C) 50 percent.
D) 100 percent.
19) If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is
A) 0 percent.
B) 5 percent.
C) 10 percent.
D) 20 percent.
20) If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from
now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?
Assignment #3: Behavior of Interest Rates
(10 questions)
1) If wealth increases, the demand for stocks ________ and that of long-term bonds ________, everything else held constant.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
2) An increase in an asset’s expected return relative to that of an alternative asset, holding everything else constant, ________ the quantity demanded of the
asset.
A) increases
B) decreases
C) has no effect on
D) erases
3) An increase in the expected rate of inflation will ________ the expected return on bonds relative to the that on ________ assets, everything else held
constant.
A) reduce; financial
B) reduce; real
C) raise; financial
D) raise; real
4) If fluctuations in interest rates become smaller, then, other things equal, the demand for stocks ________ and the demand for long-term bonds ________.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
5) The opportunity cost of holding money is
A) the level of income.
B) the price level.
C) the interest rate.
D) the discount rate.
#3 Continued
6) Higher government deficits ________ the supply of bonds and shift the supply curve to the ________, everything else held constant.
A) increase; left
B) increase; right
C) decrease; left
D) decrease; right
7) When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________,
everything else held constant.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; falls
D) decreases; increases; rises
8) In the Keynesian liquidity preference framework, an increase in the interest rate causes the demand curve for money to ________, everything else held
constant.
A) shift right
B) shift left
C) stay where it is
D) invert
9) When the Fed decreases the money stock, the money supply curve shifts to the ________ and the interest rate ________, everything else held
constant.
A) right; rises
B) right; falls
C) left; falls
D) left; rises
10) The riskiness of an asset is measured by
A) the magnitude of its return.
B) the absolute value of any change in the asset’s price.
C) the standard deviation of its return.
D) risk is impossible to measure.
Assignment #4: 4 Tools of Monetary Policy
and the Central Bank
Explain the 4 Tools of Monetary Policy and how the
Central Bank impacts the overall economy. Make
sure to include a graph of how changes in the
money supply impact interest rates.
#5 Different Types of Markets
Explain and give an example of the following
financial markets, make sure to include who
participates in each market:
Money Market
Capital Market
Bond Market
Mortgage Market
Stock Market
Foreign Exchange Market
Derivative Security Market
Assignment #6: Nonbank Finance
and Derivatives
1)
2)
List and explain 4 types of nonbank financing
Explain the 4 types of derivatives and give an example of each.
Assignment #7: International Finance
1) Explain what the World Bank and the IMF are and the goals of both.
2) What are a fixed exchange rate and a floating exchange rate?
3) If the U.S. Federal Reserve Bank increases the money supply, what happens to
the value of the U.S. dollar and the exchange rate?
4) If the U.S. government increases the deficit and Federal Debt, what happens to
the value of the U.S. dollar?
5) When did the U.S. go off of the Gold Standard?
6) Explain the Trilemma.
7) Assume that there is a fixed exchange rate is overvalued, what can the central
bank due to defend the currency?
8) What is the difference between a spot and forward exchange rate?
9) What is the current value of the Euro and Yen exchange rates?
10) If the Euro depreciates relative to the dollar, are American goods more or less
expensive? Why?
Assignment #8
In your own words, explain Flash Trading and Dark Pools.
Do you think they are fair? Why or Why Not? How
should the government regulate them?
In your own words, explain the Role of Fannie and Freddie
in the housing market.

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