EC 202 EXAM 2 QUESTIONS WITH COMPLETE ANSWERS

Pricing Bonds: Bond Price Equation


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(Coupon 1)/(1+i) + (Coupon 2)/(1+i)^2 +...+ (Coupon n)/(1+i)^n + (Face
Value)/(1+i)^n




Per Capita GDP Equation 2


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APL x LFPR




Frictional Unemployment

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Unemployment associated with better job opportunities




Pricing Bonds: Prices and Yields move ___________


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inversely




Yields


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The income return on an investment- i.e. interest or dividends received
from a security




If you want investors to assume risk...


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Then you have to pay them




Unemployment Rate Equation


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, [Unemployment/(E+U)] x 100




Per Capita GDP Equation


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GDP/Population




Inflation Risk


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The chance that the cash flows from an investment won't be worth as much
in the future because of changes in purchasing power due to inflation




Pricing Bonds: Why would the price decrease or increase?


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Because price is a function of several variables




Coupon Payment Equation


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