I.Multiple Choice

1. The interest is the_______________.

A. cost to borrowers ofobtaining money

B. return or yield on money forlenders

C. time value of money

D. all of the above

2. _______________representsthe value today of funds to be received or lent on a future date.

A. Compounding 

B. The money illusion

C. The present value

D. The principal

3. If Eric lends Dan $5,000and Dan agrees to repay Erik $6,000 in 1 year’s time, the $5,000 is the______________.

A. interest rate

B.compounding amount

C. principal

D. real return

4. Which of these questionsdoes discounting answer? ___________.

A.What is the present valueof money to be paid in the future

B. What is the future valueof money to be paid in the future

C. What is the future valueof money to be paid in the present

D. None of the above

5. The periodic paymentsmade to bondholders is called the ___________.

A. divident

B. coupon payment

C. consol

D. principal

6. Coupon payments are equalto the ___________.

A. coupon rate on a bondmultiplied by the face value of the bond

B. par value on a bonddivided by the face value of the bond

C. par value on a bond minusthe face value of the bond

D. coupon rate on a bondminus the face value of the bond

7.Bond generally share thefollowing characteristics: ______________.

A. a maturity longer thanten years

B. a par or face value

C. equal periodic interestpayments

D. all of the above

8. A bond sells at_________because interest rates have increased since the bond was originallyissued.

A. an inflation premium  

B. par value

C. a premium above par

D. a discount from par

9. If a bond is sold at adiscount from par, this ____________.

A. lowers the yield on thebond

B. does not change the yieldon the bond

C. raises the yield on thebond

D. none of the above

10. In general, if bondprices are rising, then interest rates are ___________.

A. rising 

B. falling

C. unchanging

D. rising slightly, thenstabilizing

II Define brieflythe following terms and concepts.

1. interest  

2. interest rate

3. compounding

4. discounting

5. term structure of interest rate

6. risk structure of interest rate

III Translate thefollowing sentences into Chinese.

1.  Real interest rateis the nominal rate you earn corrected for the change in the purchasing powerof money or for the expected inflation.

2.  Floating interestrate refers to the interest rate that is not static during the period of financing,but is adjusted according to the changes of market interest rates now and then.

3.  Prime interest raterefers to the interest rate that enjoys preferential conditions and is higherthan the general rate and lower than the general lending rates.

4.  The benchmark raterefers to the rate that leads and affects other interest rates.

5.   Market interestrate is the rate wholly determined by the demand for and supply of funds in thefinancial markets at certain time.

IV Translate thefollowing sentences into English.

1. 利率是对贷方今天贷出资金（以后消费）的回报，是借方今天借入资金（以后偿还）的成本。

2. 复利可用于计算今天借出一笔资金的未来终值是多少？

3.   收益率曲线是说明某种债券的利率（收益）与其到期期限之间关系的图形。

4. 投资者是风险厌恶者，因此他们必须在获得额外的补偿后才会承担更多的风险。

5. 额外的收益或利息被称为风险溢价，它随着债务人偿还债风险的增加而增长。