Consumer price index. What rates are more volatile. What would the price index equal in 2014?Refer to Exhibit 10-3. if inflation increases so will interest rates, if inflation decreases so will interest rates.
Which one of the following statements is correct concerning bond investors? If inflation is expected to increase, then. M V = P Y (1.0526.4) 2.0 = P (1.035 11.5) Pnext year = 1.13 Expected inflation (1.13-1.11)/1.11 * 100% 1.8%
vice versa for recessions. how does the price of capital tend to change during a boom? Which of the following is an example of cyclical unemployment? If the real rate of interest is to remain unchanged, the nominal interest rate in the second year must:The costs imposed on a firm from changing listed prices is termed:Which of the following refers to extremely high rates of inflation for sustained periods of time?Given a fixed nominal interest rate on a loan, unanticipated deflation:If the nominal rate of interest is 10.5 percent, and the inflation rate is 4.3 percent, what is the real rate of interest?Refer to Exhibit 10-3. What would the price index equal in 2015?Refer to Exhibit 10-4. the real rate of return plus a risk premium plus an expected inflation premium.Which one of the following will tend to cause domestic interest rates to rise?The single most important factor that influences the behavior of market interest rates isWhich one of the following statements concerning interest rates is correct?A federal budget surplus will cause interest rates to decline.The yield curve depicts the relationship between a bond's yield to maturity and itsgenerally results from actions by the Federal Reserve to control inflation.require higher long-term interest rates today if they expect higher inflation rates in the future.According to the expectations hypothesis, investors' expectations of decreasing inflation will result inDownward sloping or flat yield curves often indicate Long-term bonds are ________ than short-term bonds.The liquidity preference theory supports ________ yield curves.the yield curve reflects the maturity preferences of financial institutions and investors.Market segmentation theory explains the typical upward sloping shape of yield curves as a function of normally greater demand for short term notes than for long-term bonds.If the yield curve begins to rise sharply, it is usually an indication thatinflation is starting to increase, or is expected to do so in the near future.Evidence indicates that the theory of interest rates with the most predictive power isa combination of expectations, market expectations and liquidity preference.If inflation is expected to increase significantly, cautious bondholders shouldWhich one of the following statements is correct concerning bond investors?Conservative investors buy bonds when interest rates are high.If you are an income-oriented investor and you feel that interest rates are relatively high and will decline in the future, you should purchaseWhich of the following statements concerning the current yield is correct?It is of great interest to conservative bond investors seeking current income.The conventional way to calculate the bond-equivalent yield (BEY) for a bond is tocommonly used for bonds with deferred-call provisions.The value of a bond can be calculated several different ways, depending on the investor's objectives. Mitch will benefit from the inflation.The real interest rate is calculated by subtracting inflation from the nominal interest rate.A rapid, unexpected increase in the inflation rate could make real interest rates negative.Unanticipated inflation will benefit creditors at the expense of debtors.Economists believe that the Consumer Price Index tends to overstate the actual rate of inflation.The CPI measures the average level of prices of all final goods and services produced in the economy.The construction of a price index is complicated by several factors, including changes in the quality of goods and services over time, the introduction of new products, and the disappearance of old, outmoded products.During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in:Creditors are paid back money with less spending power than they expected when the money was loaned out.Which of the following groups are typically harmed by unexpected inflation?The difference between the nominal interest rate and the rate of inflation is:the nominal interest rate minus the inflation rate.If inflation had long been 4% and was therefore expected to continue, then it unexpectedly increased to 7% inflation:the real interest rate on loans issued just before the change occurred would decrease by three percentage points.If inflation had long been 7% and was therefore expected to continue, then it unexpectedly increased to 4% inflation:the real interest rate on loans issued just before the change occurred would increase by three percentage points.If you were a borrower, which of the following unexpected changes in inflation would you prefer once you have taken out a long term fixed rate loan?If you were a lender, which of the following unexpected changes in inflation would you prefer once you have issued a long term fixed rate loan?If the nominal interest rate is 6% and the inflation rate is 3%, the real interest rate isIf the nominal interest rate is 3% and the inflation rate is 6%, the real interest rate isIf the real interest rate is 3% and the inflation rate is 6%, the nominal interest rate isWhat would happen to the real interest rate if originally the nominal interest rate was 14% and the inflation rate was 10%, then the nominal interest rate fell to 7% as the inflation rate fell to 4%?
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