Answer Key to Study Questions for Test #3

Here is the key to the sample multiple choice problems for the 3rd test.

1-B, 2-B, 3-D, 4-B, 5-D, 6-D,
7-D, 8-D, 9-A, 10-A, 11-A, 12-C,
13-D, 14-D, 15-D, 16-D, 17-D, 18-D, 19-D,
20-D, 21-D, 22-D, 23-D, 24-A, 25-B,
26-E, 27-A, 28-C*, 29-D, 30-A,
31-D, 32-A, 33-B, 34-C.

Let me know if you think there are any errors.

For problems 2 and 3: Full disclosure--I pulled many of these problems from a test bank. The test bank obviously plays fast and loose with the rounding.

#3: You should have calculated $95.23, rounding to $95.

#4: You should have calculated $1997.20, rounding to $2,000.

I agree it is inappropriate to round so much when dealing with problems like these. I'll be much more precise for the real test.

*#28 was originally listed as D. C is much better. But I think this is a lousily worded question and I'll be more conscientious for the real test. ;-)

You can consider the terms "liquidity preference" or "liquidity premium" theories of the term structure of interest rates as the same thing. Similarly, "expectations theory" or "expectations hypothesis" is the same a "unbiased expectations".

J