State True or False. Bond prices and interest rates are directly or positively related. | Homework.Study.com (2024)

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• True or false? The dollar price and interest rate of a bond have a positive relationship.
• As interest rates go up, bond prices will go down. a. True. b. False.
• True or false? The value of a bond increases as interest rates increase.
• True or false? The dollar price and interest rate of a bond have an inverse relationship.
• 1) True or False? A change in the relative return of a bond affects the bond's risk premium. 2) True or False? A falling real interest rate means nominal rates are falling as well. 3) A three-year c
• Because interest rates are forward-looking, there is no difference between nominal and real rates. a. True. b. False.
• Nominal interest rates can never be negative. True or false?
• Bond prices move inversely with interest rates and time spans to maturity. A. True B. False
• True or false? For a discount bond, the return on the bond is equal to the rate of capital gain.
• Answer true or false: Nominal interest rates can never be negative.
• Real rate of interest effect is the nominal rate of interest earned on a project. True or false?
• There is an interest rate effect, an impact of Inflation on interest rates. True False Depends
• As the "market interest rate" increases, bond prices will move in the same directions? True or False.
• True or false? If the real interest rate is 3% and the inflation rate is 5%, the nominal interest rate is 2%.
• The real interest rate has a positive relationship with the supply of loanable funds. a. True b. False
• The nominal interest rate is approximately equal to the real interest rate minus the inflation rate. a. True b. False
• True or false? The nominal interest rate is related to inflation.
• True or false? An increase in the bond price increases the bond yield.
• Real interest rates can be positive, zero, or negative, but nominal interest rates can only be zero or positive. State whether True or False?
• The real rate of interest is the nominal rate of interest times the inflation rate. Is this True or False?
• True or false? The values of outstanding bonds change whenever the going rate of interest changes.
• Generally, the longer the maturity on a bond, the lower the interest rate. (a) True (b) False.
• As the demand for bonds increases, the interest rate increases. True False
• A zero-coupon bond pays a flat coupon rate of $100 no matter what the interest rate is. a. True. b. False.
• Bond prices move inversely with interest rates and time spans to maturity. True or False? Explain.
• True or false? If the real interest rate is 3% and the nominal interest rate is 5%, this means the inflation rate is 8%.
• If the inflation rate is 3% and the real interest rate is 4%, then the nominal interest rate is 1%. True or false?
• If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent. (i) True (ii) False
• True or false? If the nominal interest rate is 5% and the inflation rate is 2.5%, this means the real interest rate is 2.5%.
• True or false? If the nominal interest rate is 5% and the inflation rate is 4%, this means the real interest rate is 9%.
• When ten-year interest rates in the market increase the value of outstanding 10-year bonds will also increase. a. True b. False
• There is a positive relationship between the demand for loanable funds and the real interest rate. a. True b. False
• A bank that has (A-) rated debt will be able to issue bonds with yields that are below the U.S. Treasury Yield Curve. a. True b. False
• The price sensitivity of a bond to a given change in interest rates is generally greater the longer the bond's remaining maturity. True or False?
• True or false? If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.
• An increase in the real interest rate is assumed to result in a decrease in savings. a. True b. False
• The money (nominal) interest rate will be less than the real interest rate only when deflation is occurring. a. True. b. False.
• When real interest rates are high, people want to take advantage of the high return on bonds, so they choose to hold less money. A) True B) False
• TRUE/FALSE QUESTIONS Briefly explain your answer 1. The yield curve is the graph that show relationship between interest rates on bonds and default risk on bonds with different rating 2. If the shor
• True or false? A bond's dollar price is calculated as a growth rate.
• Answer true or false: For the same interest rate, compounding interest does not always yield a larger future worth value than a simple interest rate.
• State whether true or false. A decrease in the real interest rate causes the IS curve to shift to the right.
• Determine whether the following statement is true or false: The nominal rate of interest is the difference between the real rate and the expected rate of inflation.
• The pure rate of interest is the interest rate on a risk free loan. - True - False
• True or false? Stocks are usually safer than bonds and have higher return rates.
• True or false? The real exchange rate is not related to the nominal exchange rate.
• True or False: The price of a bond and its yield to maturity always move in opposite directions.
• If nominal interest rates in the U.S. rise, then the U.S. dollar will appreciate. Is this statement true, false, or uncertain? You will be graded solely on your explanation.
• The greater the interest rate and the longer the period of time, the higher the present value. a. True b. False
• Everything else being equal, the higher the interest rate, the higher the future value. a. True b. False
• True or false? A U.S. government bond generally pays a higher interest rate than a bond issued by a corporation.
• Current real money demand is inversely related to the future nominal interest rate. True or false?
• True or False. \\ Since bonds are traded frequently, they can be referred to as ''equity'' securities?
• Identify if the following statement is true or false and explain. The yield curve is the graph that show relationship between interest rates on bonds and default risk on bonds with different rating.
• True or false? If the Federal Reserve wants to raise the nominal interest rate, it needs to buy bonds.
• An investor that is holding onto a bond in order to sell it at a profit is hoping that interest rates will rise. True or False?
• True or False: If the government guaranteed the payment on a bond, all else equal, the price would be expected to rise.
• State whether true or false. A decrease in the real interest rate causes the investment to increase which causes the IS curve to shift to the right.
• In a perfect capital market, expected returns on all bonds must be equal to the risk-free (T-bill) rate. True or false?
• In a perfect capital market, expected returns on all bonds must be equal to the risk-free (T-bill) rate. A. True B. False
• True or false? If the interest rate increases, the real demand for money also increases.
• An increase in the rate the Treasury is issuing new Treasury bonds is an example of expansionary monetary policy. a. True b. False
• When interest rates are low, investment in stocks is more attractive, holding all else constant. True or False?
• State true or false and justify your answer: Expansionary monetary policy tends to lower interest rates.
• Real money demand depends on the real interest rate, not the nominal interest rate. True or False?
• In a perfect capital market with risk-neutral investors, expected returns on all bonds must equal the risk-free rate. A. True B. False
• In a perfect capital market with risk-neutral investors, expected re- turns on all bonds must equal the risk-free rate. True or false?
• Low-interest rates are primarily responsible for the fact that the U.S. debt is relatively manageable. Is this True or False?
• The investment curve is an upward sloping curve that indicates a direct relationship between the interest rate and the level of investment. True or false?
• Consider the following statement: "In the long-run, prices, output, and interest rates always return to the same value." Is the statement true or false?
• According to the Keynesian view, when interest rates are relatively low, it is a good time to buy and hold bonds. a. True b. False
• After the 2008 financial crisis, interest rates on U.S. government bonds fell and have stayed relatively low. True or false?
• For a given positive interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value. a. True b. False
• True or false? One of the functions of the Federal Reserve is lending money directly to households and firms.
• Changes in expected future one-year real interest rates have a much larger effect on spending than changes in the current one-year real interest rate. True or false?
• True or false? One of the functions of the Federal Reserve is setting the interest rate on home mortgages and auto loans.
• True or false? A change in yield affects the prices of short-term bonds more than the prices of long-term bonds.
• Expansionary monetary policy (by itself) tends to lower interest rates. a. True. b. False.
• The nominal and effective rates are equivalent for annual compounding. a. True b. False
• True or false? Bonds can never default.
• State True or False: If the Fed buys bonds in the open market, the money supply decreases.
• Suppose the economy is in a liquidity trap. A monetary contraction will not have any effect on the nominal interest rate, though a monetary expansion may have an effect on the nominal interest rate. Is this statement true or false? Explain.
• True or false? Crowding out through interest rates occurs when expansionary fiscal policy causes interest rates to fall.
• True or false? If the demand for loans increases, the interest rate will fall.
• Since bonds are traded frequently, they can be referred to as "equity" securities? True or False.
• When real interest rates (adjusted for inflation) rise, investment in machinery is encouraged.? true or false.
• True or false? The more valuable the collateral backing up a loan, the higher the interest rate charged on that loan.
• True or false? The interest rate advertised and charged by banks to consumers (like if you get a car loan or a mortgage) is the real interest rate (not the nominal interest rate).
• Higher national debt leads to higher velocity since bonds serve as a substitute for money for some purposes. a. True b. False
• Expected profit and the real interest rate affect investment decisions. a. True b. False
• Changes in interest rates affect all four components of aggregate demand. a. True. b. False.
• There is an inverse relationship between the interest rate and the quantity of money demanded. a. True. b. False.
• Assume the CPI was 110 in 2006 and 114 in 2007. The real interest rate during this period was 6.5%. It implies that the nominal interest rate was 10.14% (rounded to 2 decimals). True or false?
• The effective annual interest rate in continuous compounding is equal to the nominal annual interest rate. True or false?
• The effective annual interest rate in continuous compounding is equal to the nominal annual interest rate. (a) True (b) False.
• In normal times (when interest rates are not at or near zero) expansionary monetary policy tends to lower interest rates. a. True. b. False.
• Banks that maintain their reserves at the Fed receive interest on these funds; the rate they receive is called the "prime rate." True or false?
• The internal rate of return is defined as the interest rate that makes the net present value of an investment stream exactly equal to zero a. True b. False
• True or False: The investment curve is an upward sloping curve that indicates a direct relationship between the interest rate and the level of investment.