Question

B) 5 pend an anual interest payment of $25, the interest rate is B) 5 percent. 31) 31) If D) 10 percent A) 2.5 percent a price of $500 and an annual interest C)7.5 percent. 32) 32) If the interest rates on all bonds rise from 5 would you prefer to have been holding? B) a bond with ten years to maturity with one year to maturity percent over the course of the year, which bonc A) a bond with twenty years to maturity C) a bond with five years to maturity D) a bond 33) when the and fewer incentives to interest rate is low, there are greater incentives to A) real; borrow; lend C) real; lend; borrow B) nominal; lend; borrow D) market; lend; borrow 34) In which of the following situations would you prefer to be the lender? A) The interest rate is 9 percent and the expected inflation rate is 7 percent. B) The interest rate is 4 percent and the expected inflation rate is 1 percent. C) The interest rate is 25 percent and the expected inflation rate is 50 percen D) The interest rate is 13 percent and the expected inflation rate is 15 percent. t. 35 35) If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is A) -5 percent. D) 12 percent. B) -2 percent. C) 2 percent. anc 36) 36) Everything else held constant, if the expected return on Disney stock rises from 5 to 10 percent anc ock the expected return on CBS stock is unchanged, then the expected return of holding CBS st relative to Disney stock and the demand for CBS stock B) rises; rises C) falls; rises D) falls; falls A) rises; falls 37)

Answer 1

Q31)ANSWER

GIVEN DATA

PRICE=$500

ANNUAL INTEREST PAYMENT=$25

Price of a perpetuity = Annual interest payment / rate of interest

Therefore, P = $500, interest payment = $25

rate of interest = 25/500 = 5%