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
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)
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