FIN 364 DeVry Week 3 Homework

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FIN 364 DeVry Week 3 Homework

FIN364

FIN 364 DeVry Week 3 Homework

 

FIN 364 DeVry Week 3 Homework

Question 1. Question : (TCO 4) Which of the following factors influence the real rate of interest?

  • Investor’s positive time preference
  • The gold supply
  • Return on capital investments
  • Both a and c

Question 2. Question : (TCO 4) Negative realized real rates of interest are associated with periods where

  • inflation forecasts significantly underestimate inflation.
  • nominal interest rates were too high relative to actual inflation.
  • prior inflation forecasts overestimated inflation.
  • bond prices were priced too low relative to actual inflation.

Question 3. Question : (TCO 4) The demand for loanable funds may shift upward (increase) from

  • a decline in the supply of loanable funds.
  • a decline in business prospects.
  • an improvement in technology.
  • an expectation of an upcoming recession.

Question 4. Question : (TCO 4) Which of the following is best associated with interest rate movements and inflation?

  • Interest rates move inversely with inflation.
  • Interest rates vary directly with expected inflation.
  • Interest rates vary directly with past inflation rates.
  • Inflation is impacted by expected interest rates.

Question 5. Question : (TCO 4) Deficit spending units (DSU) are represented in loanable funds theory as

  • suppliers of loanable funds.
  • demanders of financial claims.
  • demanders of loanable funds.
  • DSUs are not represented in the loanable funds theory of interest rate determination.

Question 6. Question : (TCO 4) Which of the following is more likely to adversely affect long-term bond prices?

  • A forecast of lower inflation in the future.
  • A forecast of a slower economy next year.
  • A forecast of higher inflation in the future.
  • A forecast of lower government budget deficits.

Question 7. Question : (TCO 4) Economies with very high current and expected inflation rates

  • will have a significant long-term debt market.
  • will have debt instruments with interest rates indexed to the inflation rate.
  • will favor long-term financing over short-term.
  • will have very low interest rates.

Question 8. Question : (TCO 4) A decrease in the money stock by the Federal Reserve

  • shifts the supply of loanable funds to the left, decreasing interest rates.
  • shifts the demand for loanable funds to the left, increasing interest rates.
  • shifts the supply of loanable funds to the left, increasing interest rates.
  • shifts the supply of loanable funds to the right, increasing interest rates.

Question 9. Question : (TCO 4) The lower a consumer’s positive time preference for consumption,

  • the more savings they will accumulate.
  • the lower the level of interest rates.
  • the greater the supply of loanable funds.
  • All of the above

Question 10. Question : (TCO 4) If the actual rate of inflation is less than the rate expected during a period,

  • the borrowers benefited at the expense of lenders.
  • the lenders benefited at the expense of borrowers.
  • both borrowers and lenders benefited.
  • neither borrowers nor lenders benefited.

Question 11. Question : (TCO 4) An increase (shift to right) in the supply of loanable funds (SL) may be related to all but one of the following?

  • An increase in the money supply.
  • An increase in household thriftiness.
  • An increase in household income.
  • An increase in personal income taxes.

Question 12. Question : (TCO 4) If the real rate of interest is 4% and the expected inflation rate was 7%, a loan at 12%

  • would reward the lender at the borrower’s expense.
  • would reward the borrower at the lender’s expense.
  • would penalize the lender at the borrower’s expense.
  • None of the above

Question 13. Question : (TCO 4) An investor received an 8 percent coupon rate last year on a $1000 bond purchased at par. The inflation rate during the year was 4 percent and is expected to be 5 percent next year. The realized real rate earned by the investor last year was

  • 8%.
  • 3%.
  • 4%.
  • -1%.

Question 14. Question : (TCO 4) An investor earned 11 percent last year, a year when actual inflation was 9 percentand was expected to have been 6 percent. The investor realized real rate of return was

  • 3%.
  • 2%.
  • 11%.
  • 15%.

Question 15. Question : (TCO 4) With the real rate at 3 percent, most loans were made at 10 percent last year. This year interest rates have declined to 8 percent. What was the expected inflation rate last year?

  • 5%
  • 2%
  • 7%
  • 8%