21. The difference between the price that a dealer is
willing to pay and the price at which he or she will sell is called the:
A. equilibrium.
B. premium.
C. discount.
D. call price.
E. spread.
22. A bond is quoted at a price of $989. This price is
referred to as which one of the following?
A. call price
B. face value
C. clean price
D. dirty price
E. wholesale price
23. Pete paid $1,032 as his total cost of purchasing a
bond. This price is referred to as the:
A. quoted price.
B. spread price.
C. clean price.
D. dirty price.
E. call price.
24. Real rates are defined as nominal rates that have
been adjusted for which of the following?
A. inflation
B. default risk
C. accrued interest
D. interest rate risk
E. both inflation and interest rate risk
25. Interest rates that include an inflation premium
are referred to as:
A. annual percentage rates.
B. stripped rates.
C. effective annual rates.
D. real rates.
E. nominal rates.
26. The Fisher effect is defined as the relationship
between which of the following variables?
A. default risk premium, inflation risk premium, and real rates
B. nominal rates, real rates, and interest rate risk premium
C. interest rate risk premium, real rates, and default risk premium
D. real rates, inflation rates, and nominal rates
E. real rates, interest rate risk premium, and nominal rates
27. The pure time value of money is known as
the:
A. liquidity effect.
B. Fisher effect.
C. term structure of interest rates.
D. inflation factor.
E. interest rate factor.
28. Which one of the following premiums is
compensation for expected future inflation?
A. default risk
B. taxability
C. liquidity
D. inflation
E. interest rate risk
29. The interest rate risk premium is the:
A. additional compensation paid to investors to offset rising prices.
B. compensation investors demand for accepting interest rate risk.
C. difference between the yield to maturity and the current yield.
D. difference between the market interest rate and the coupon rate.
E. difference between the coupon rate and the current yield.
30. A Treasury yield curve plots Treasury interest
rates relative to which one of the following?
A. market rates
B. comparable corporate bond rates
C. the risk-free rate
D. inflation
E. maturity
