CHAPTER 4 Future Value, Present Value, and Interest Rates
CHAPTER 5 Understanding Risk
CHAPTER 6 Bonds, Bond Prices, and the Determination of Interest Rates
CHAPTER 7 The Risk and Term Structure of Interest Rates
CHAPTER 8 Stocks, Stock Markets, and Market Efficiency
100
Present value of the investment plus interest equals what?
Future value
100
What is another word for expected value
mean
100
What is a bond that makes periodic interest payments forever, and the borrower pays back only interest and not the principal?
console
100
TRUE OR FALSE
Subprime mortgages are never used in mortgage backed securities because of their riskiness?
TRUE
100
What is Ownership shares in a firm; also called just
Common stock
200
Interest on interest is also know as
Compound interest
200
what does Idiosyncratic risk affect
Small number of firms and individuals
200
a commonly used, easy-to-compute measure of the proceeds the bondholder receives for making a loan.
Current Yield
200
What is a low-grade bond that was initially a high- grade bond but whose issuer fell on hard times?
Fallen Angel
200
What are the payments made to a company’s stockholders when the company makes a profit.
Dividends
300
Future value of the investment divided by the interest rate plus one equals what?
Present value
300
Investing in two securities with negative correlation is called
hedging
300
when the price of a bond is sold for less than its face value. Also called discount bonds.
Zero-Coupon Bond
300
What bond is a low-risk bond, usually a U.S. Treasury bond, to which the yield on a risky bond is compared to assess its risk?
Benchmark Bond
300
What is the total market value of a company; the price of a share of stock times the total number of shares outstanding.
Market capitalization
400
This is also sometimes called yield
Interest rate
400
Between standard deviation and variance, which is considered to be more useful in investment analysis
Standard deviation
400
What are the three types of risks?
Default Risk
Inflation Risk
Interest-Rate Risk
400
Bond yield equals the sum of which two parts:
= U.S. Treasury yield + Default risk premium
400
What is a fund that pools the resources of a large number of small investors and invests them in portfolios of bonds, stocks, and real estate; managed by professional managers.
Mutual funds
500
What is the interest rate that equates the present value of an investment with its costs
Internal rate of return
500
Which investment is more risky?
A: $1000 bond/Standard deviation $350/ S&P 500 BBB/
B: $1000 bond/ Standard deviation $285/S&P 500 AA/
A
500
If a consol were to offer an annual coupon of $100 with a 10% interest rate, what would the price of the consol be?
$1,000
500
What is the current Mortgage Interest Rate for 30 years fixed?
3.5%
500
What is the most broadly based value-weighted stock index in use. It covers the roughly 6,500 publicly traded stocks in the United States.