Interest rates typically follow a __________ pattern relative to economic activity and the default premium typically follows a ___________ pattern relative to economic activity.

Part III Begins Here: Answer 3 of the following 5 numbered questions @ 16 points each. Select yes if you understand the instructions, and continue the exam.

16-point question 3. Do each of the following. i. Indicate in the space provided if a person should be more or less willing to buy a house under the following circumstances:                a. You just inherited $100,000. ________                b. Real estate commissions rise from 6% to 7% of the sales price. ________                c. you expect Microsoft stock to double in value over the next year. ________                d. prices in the stock market become less volatile. ________                e. you expect housing prices to rise. ________ ii. If mortgage rates rise from 5% to 10 % but the expected rate of increase in housing prices rises from 2% to 9%,      explain if people are going to be more willing or less willing to buy houses. iii.  Calculate the following: a bond with a coupon rate of 4.8% will mature in 5 years. The $10,000 par value        instrument is currently selling for $9,875.   Calculate the current yield on this bond. Calculate the average annual capital gain or loss the owner will incur if the bond is held to maturity. Calculate the approximate yield to maturity on this bond.

Which of the following could be expected to cause the equilibrium interest rate to rise?

Which of the following would NOT cause the demand for bonds to change?

Part II: Short Problems begins here–Answer 5 of the following 7 Roman numeral questions @ 5 points each Select yes if you understand the instructions, and continue the exam.

A client who is postoperative following a knee arthroplasty is concerned about the adverse effects of the medication prescribed for pain management.  Which of the following memeber of the interprofessional care team can assist the client in understanding the medication’s effects? Select all that apply.

Which of the following bonds would you prefer to be buying? Assume n = 30 for all bond maturities.

If a saver pays $975 for a bond with a face value of $1,000 and annual payments, it follows that

16-point question 1. Eight years ago you bought a $750,000, 25-year, deep discount bond with a market interest rate of 7.84%. Since     then market rates have fallen to 6.65% and you find that you must sell the bond. a. Calculate the initial and current price of the bond.            b. Calculate the annual holding period yield on this instrument and compare it to the yield to maturity you were     expecting when you purchased the instrument. c. Explain whether your return would have been relatively greater or less than you received in part b if you held a    15-year instrument initially. Support your conclusion with the appropriate work. d. Explain whether your return would have been relatively greater or less than you received in part b if you held a     5-year instrument initially.