Question

Question 23. 1 pts

Which one of the following provides compensation to a bondholder when a bond is not readily marketable at its full value?

Group of answer choices

A. Interest rate risk premium

B. Inflation premium

C. Liquidity premium

D. Taxability premium

E. Default risk premium

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Question 24. 1 pts

If your nominal rate of return is 8.68 percent and your real rate of return is 2.05 percent, what is the inflation rate?

Group of answer choices

A. 5.32 percent

B. 6.50 percent

C. 6.29 percent

C. 6.29 percent

E. 16.77 percent

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Question 25. 1 pts

You expect to receive a gift of $5,500 one year from today. You’ve researched and found that you can investment this money at 8.6 percent, compounded annually, until you have $25,000. At that time, you want to use this money as a down payment on a home. How long from now, will it be until you can make the down payment?

Group of answer choices

A. 16.57 years

B. 17.66 years

C. 18.66 years

D. 18.35 years

E. 19.35 years

Answer 1

23. Option c is correct. Liquidity Premium . When the bond is not marketable it has less liquidity.

24. Inflation rate =(1+Nominal Rate)/(1+Real Rate)-1 =(1+8.68%)/(1+2.05%)-1 =6.50% (Option b is correct option)

25. Value after one year =5500
Rate =8.6%
FV =25000
FV =PV*(1+r)^n
25000=5500*(1+8.6%)^n
Applying log on both sides using financial calculator
n=Log(25000/5500)/log(1.086)=18.35 years
Number of years =1+18.35 =19.35 years

(Option E is correct option)