III Label each of the following statements true false or unc

III. Label each of the following statements true, false, or uncertain. Explain your choice carefully. a. The present discounted value of a stream of returns can be calculated in real or nominal b. The higher the one-year interest rate, the lower the present discounted value of a payment terms. c. d. e. next year. Interest rates are normally expected to be constant over time. Bonds are a claim to a sequence of constant payments over a number of years. The yield curve normally slopes up. IV. Compute the two-year nominal interest rate using the exact formula and the approximation formula for each set of assumptions listed in (a) through (c). a. b. c. i,-296: if+1-396 1.-2%; if.,-10% i,-2%; ie+1-3%. The term premium on a two-year bond is 1%. +1

Solution

Ans

True. We can use price indexes to convert discounted values into real values

True because it is denominator of formula

False. They change quite frequently

True. Here amount is fixed

True because shorterm interest rates are expected to rise over a period of time.

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