If the process of coming back to present value (PV) from future cash flows is called...
- If the process of coming back to present value (PV) from future cash flows is called discounting, then the process of going to future value (FV) from present value (PV) is called compounding. (TRUE/FALSE)?_______________________
- For a corporate bond, the quoted interest rate minus the real
risk-free rate is equal to which of the following?
- Nominal interest rate
- Real inflation rate plus nominal interest rate
- Market risk premium
- The sum of inflation premium, default risk premium, liquidity premium and maturity risk premium
Homework Answers
Q1:
True; Compounding can be said as finding the future value of an investment based on the interest rate given.
Q2:
option D: For a corporate bonds the interest rates demanded is higher due to these premiums asked by the customers
Add Answer to:
If the process of coming back to present value (PV) from future
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3. Discounting is the process of moving a present value sum to the future value and...
3. Discounting is the process of moving a present value sum to the future value and compounding is the process of moving a future value sum to the present value. A. True B. False
Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.50%, a maturity...
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Question 1 In the process of compounding, we move from present to future In the process...
Question 1 In the process of compounding, we move from present to future In the process of discounting, we move from future to present Question 2 In the I Select ] case, interest earns interest. In the ISelect) cast, interest doesn't earn interest. [ Select ] simple rate of interest compound rate of interest Question3 There are 12 months in one year, 4 weeks in one month, so 1 year-48 weeks. True False
answer what you know ! its short question 6. At present, 20-year Treasury bonds are yielding...
answer what you know ! its short question
6. At present, 20-year Treasury bonds are yielding 4.9% while some 20-year corporate bonds that you are interested in are yielding 9.2 %. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.29% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds? Note that a Treasury security should have no default-risk premium....
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4.Which of the following statements is (are) correct?(x)A 2-year Treasury security has a higher liquidity risk...
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Assume that the average real interest rate is 2%, the default risk premium is 3%, the...
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The process for converting present values into future values is called compounding . This process requires...
The process for converting present values into future values is called compounding - this process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?The duration of the investment (N)The present value (PV) of the amount investedThe inflation rate indicating the change in average pricesThe interest rate (I) that could be earned by invested fundsIdentify whether the following statements about the simple and compound interest methods are true or...
3. Discounting is the process of moving a present value sum to the future value and compounding is the process of moving a future value sum to the present value. A. True B. False
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answer what you know ! its short question
6. At present, 20-year Treasury bonds are yielding 4.9% while some 20-year corporate bonds that you are interested in are yielding 9.2 %. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.29% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds? Note that a Treasury security should have no default-risk premium....
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