If I Is the Yield to Maturity of a Fixed-Payment

question 53

Multiple Choice

If i is the yield to maturity of a fixed-payment loan,

• A)the value of the loan today equals i times the sum of the values of all the loan payments.
• B)i equals the present value of the loan payments.
• C)the value of the loan today equals the sum of the values of the loan payments.
• D)the value of the loan today equals the present value of the loan payments discounted at rate i.

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Definitions:

Exchange Rate Risk

The potential for investors to experience losses due to changes in currency exchange rates.

Interest Rate Swap

A financial derivative agreement between two parties to exchange one stream of interest payments for another, based on a specified principal amount.

Floating-Rate Loan

A loan with an interest rate that adjusts periodically based on a reference interest rate index, reflecting changes in market interest rates.

Savings And Loan Industry

A segment of the financial industry focused on accepting savings deposits and making mortgage and other loans to individuals and businesses.