[Solved] Since the Early 1950s,nominal Interest Rates and Real Interest Rates

Q93: If you expect the inflation rate to be 4 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)-3 percent. B)-2 percent. C)3 percent. D)7 percent.

Q94: In the United States during the late 1970s,the nominal interest rates were quite high,but the real interest rates were negative. From the Fisher equation,we can conclude that expected inflation in the United States during this period was A)irrelevant. B)low. C)negative. D)high.

Q95: The interest rate on Treasury Inflation Indexed Securities can be roughly interpreted as A)the real interest rate. B)the nominal interest rate. C)the rate of inflation. D)the rate of deflation.

Q96: Assuming the same coupon rate and maturity length,the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight into A)the nominal interest rate. B)the real interest rate. C)the nominal exchange rate. D)the expected inflation rate.

Q97: Assuming the same coupon rate and maturity length,when the interest rate on a Treasury Inflation Indexed Security is 3 percent,and the yield on a nonindexed Treasury bond is 8 percent,the expected rate of inflation is A)3 percent. B)5 percent. C)8 percent. D)11 percent.

Q99: Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.

Q100: Duration is A)an asset's term to maturity. B)the time until the next interest payment for a coupon bond. C)the average lifetime of a debt security's stream of payments. D)the time between interest payments for a coupon bond.

Q101: Comparing a discount bond and a coupon bond with the same maturity A)the coupon bond has the greater effective maturity. B)the discount bond has the greater effective maturity. C)the effective maturity cannot be calculated for a coupon bond. D)the effective maturity cannot be calculated for a discount bond.

Q102: The duration of a coupon bond increases A)the longer is the bond's term to maturity. B)when interest rates increase. C)the higher the coupon rate on the bond. D)the higher the bond price.

Q103: All else equal,when interest rates ________,the duration of a coupon bond ________. A)rise;falls B)rise;increases C)falls;falls D)falls;does not change