The value of a bond is inversely related to changes in investors’

| November 9, 2018

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Which of the following statements is true?

The value of a bond is inversely
related to changes in investors’ present required rate of return.

If interest rates
decrease, the value of a bond will decrease.

If interest rates
increase, the value of a bond will increase.

None of the above.

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The formula for calculating the present value
(PV) of a perpetuity is
PV = PP/(1 + i), where PP is the perpetuity payment and i is the discount
rate.

True

False

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As market rates of interest rise, investors
move their funds into bonds, thus increasing their price and lowering their
yield.

True

False

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If the interest rate is zero:

PV = FVn

PV = FV x n

FV = PV

FV = PV/en

.0/msohtmlclip1/01/clip_image002.png” alt=”Question 24 text”> Question 24

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An efficient market may be defined as one in
which the values of all securities at any instant in time fully reflect all
available information.