238177668012

Chapter6
TheRiskandTermStructureofInterestRates
6.1 RiskStructureofInterestRates
1) Theriskstructureofinterestratesis
A) thestructureofhowinterestratesmoveovertime.
B) therelationshipamonginterestratesofdifferentbondswiththesamematurity.
C) therelationshipamongthetermtomaturityofdifferentbonds.
D) therelationshipamonginterestratesonbondswithdifferentmaturities.
Answer: B
QuesStatus:PreviousEdition
2) Theriskthatinterestpaymentswillnotbemade,orthatthefacevalueofabondisnotrepaid
whenabondmaturesis
A) interestraterisk.
B) inflationrisk.
C) moralhazard.
D) defaultrisk.
Answer: D
QuesStatus:Revised
3) Bondswithnodefaultriskarecalled
A) flowerbonds.
B) no-riskbonds.
C) default-freebonds.
D) zero-riskbonds.
Answer: C
4) Whichofthefollowingbondsareconsideredtobedefault-riskfree?
A) municipalbonds
B) investment-gradebonds
C) U.S.Treasurybonds
D) junkbonds
Answer: C
QuesStatus:New
Chapter6 TheRiskandTermStructureofInterestRates 135
5) U.S.governmentbondshavenodefaultriskbecause
A) theyarebackedbythefullfaithandcreditofthefederalgovernment.
B) thefederalgovernmentcanincreasetaxestopayitsobligations.
C) theyarebackedwithgoldreserves.
D) theycanbeexchangedforsilveratanytime.
Answer: B
QuesStatus:Revised
6) Thespreadbetweentheinterestratesonbondswithdefaultriskanddefault-freebondsis
calledthe
A) riskpremium.
B) junkmargin.
C) bondmargin.
D) defaultpremium.
Answer: A
7) Iftheprobabilityofabonddefaultincreasesbecausecorporationsbegintosufferlargelosses,
thenthedefaultriskoncorporatebondswill________andtheexpectedreturnonthesebonds
will________,everythingelseheldconstant.
A) decrease;increase
B) decrease;decrease
C) increase;increase
D) increase;decrease
Answer: D
QuesStatus:Revised
8) Abondwithdefaultriskwillalwayshavea________riskpremiumandanincreaseinits
defaultriskwill________theriskpremium.
A) positive;raise
B) positive;lower
C) negative;raise
D) negative;lower
Answer: A
QuesStatus:New
136MishkinEconomicsofMoney,Banking,andFinancialMarkets,EighthEdition
9) Ifacorporationbeginstosufferlargelosses,thenthedefaultriskonthecorporatebondwill
A) increaseandthebondsreturnwillbecomemoreuncertain,meaningtheexpectedreturn
onthecorporatebondwillfall.
B) increaseandthebondsreturnwillbecomelessuncertain,meaningtheexpectedreturn
C) decreaseandthebondsreturnwillbecomelessuncertain,meaningtheexpectedreturn
D) decreaseandthebondsreturnwillbecomelessuncertain,meaningtheexpectedreturn
onthecorporatebondwillrise.
Answer: A
QuesStatus:Revised
10) Ifthepossibilityofadefaultincreasesbecausecorporationsbegintosufferlosses,thenthe
defaultriskoncorporatebondswill________,andthebondsreturnswillbecome________
uncertain,meaningthattheexpectedreturnonthesebondswilldecrease,everythingelseheld
constant.
A) increase;less
B) increase;more
C) decrease;less
D) decrease;more
Answer: B
QuesStatus:Revised
11) Otherthingsbeingequal,anincreaseinthedefaultriskofcorporatebondsshiftsthedemand
curveforcorporatebondstothe________andthedemandcurveforTreasurybondstothe
________.
A) right;right
B) right;left
C) left;right
D) left;left
Answer: C
12) Anincreaseintheriskinessofcorporatebondswill________thepriceofcorporatebondsand
________thepriceofTreasurybonds,everythingelseheldconstant.
A) increase;increase
B) reduce;reduce
C) reduce;increase
D) increase;reduce
Answer: C
QuesStatus:Revised
13) Anincreaseintheriskinessofcorporatebondswill________theyieldoncorporatebondsand
________theyieldonTreasurysecurities,everythingelseheldconstant.
B) reduce;reduce
C) increase;reduce
D) reduce;increase
Answer: C
QuesStatus:Revised
14) Anincreaseindefaultriskoncorporatebonds________thedemandforthesebonds,but
________thedemandfordefault-freebonds,everythingelseheldconstant.
A) increases;lowers
B) lowers;increases
C) doesnotchange;greatlyincreases
D) moderatelylowers;doesnotchange
Answer: B
15) Asdefaultriskincreases,theexpectedreturnoncorporatebonds________,andthereturn
becomes________uncertain,everythingelseheldconstant.
A) increases;less
B) increases;more
C) decreases;less
D) decreases;more
Answer: D
QuesStatus:Revised
16) Astheirrelativeriskiness________,theexpectedreturnoncorporatebonds________relative
totheexpectedreturnondefault-freebonds,everythingelseheldconstant.
A) increases;increases
B) increases;decreases
C) decreases;decreases
D) decreases;doesnotchange
Answer: B
QuesStatus:Revised
17) Whichofthefollowingstatementsaretrue?
A) Adecreaseindefaultriskoncorporatebondslowersthedemandforthesebonds,but
increasesthedemandfordefault-freebonds.
B) Theexpectedreturnoncorporatebondsdecreasesasdefaultriskincreases.
C) Acorporatebondsreturnbecomeslessuncertainasdefaultriskincreases.
D) Astheirrelativeriskinessincreases,theexpectedreturnoncorporatebondsincreases
relativetotheexpectedreturnondefault-freebonds.
Answer: B
18) Everythingelseheldconstant,ifthefederalgovernmentweretoguaranteetodaythatitwill
paycreditorsifacorporationgoesbankruptinthefuture,theinterestrateoncorporatebonds
will________andtheinterestrateonTreasurysecuritieswill________.
B) increase;decrease
C) decrease;increase
D) decrease;decrease
Answer: C
QuesStatus:New
19) Bondswithrelativelyhighriskofdefaultarecalled
A) Bradybonds.
B) junkbonds.
C) zerocouponbonds.
D) investmentgradebonds.
Answer: B
20) Bondswithrelativelylowriskofdefaultarecalled________securitiesandhavearatingofBaa
(orBBB)andabove;bondswithratingsbelowBaa(orBBB)haveahigherdefaultriskandare
called________.
A) investmentgrade;lowergrade
B) investmentgrade;junkbonds
C) highquality;lowergrade
D) highquality;junkbonds
Answer: B
21) Whichofthefollowingbondswouldhavethehighestdefaultrisk?
A) Municipalbonds
B) Investment-gradebonds
C) U.S.Treasurybonds
D) Junkbonds
Answer: D
QuesStatus:New
22) Whichofthefollowinglong-termbondshasthehighestinterestrate?
A) CorporateBaabonds
B) U.S.Treasurybonds
C) CorporateAaabonds
D) Municipalbonds
Answer: A
23) Whichofthefollowingshort-termsecuritieshasthelowestinterestrate?
A) Bankersacceptances
B) U.S.Treasurybills
C) Negotiablecertificatesofdeposit
D) Commercialpaper
Answer: B
24) ThebankruptcyoftheEnronCorporation
A) didnotaffectthecorporatebondmarket.
B) increasedtheperceivedriskinessofTreasurysecurities.
C) reducedtheBaa-Aaaspread.
D) increasedtheBaa-Aaaspread.
Answer: D
QuesStatus:Revised
25) ThebankruptcyoftheEnronCorporationincreasedthespreadbetweenBaaandAaarated
bonds.Thisisdueto
A) areductioninrisk.
B) areductioninmaturity.
C) aflighttoquality.
D) aflighttoliquidity.
Answer: C
QuesStatus:Revised
26) Duringaflighttoquality
A) thespreadbetweenAaaandBaabondsincreases.
B) thespreadbetweenAaaandBaabondsdecreases.
C) thespreadbetweenAaaandBaabondsisnotaffected.
D) thechangeinthespreadbetweenAaaandBaabondscannotbepredicted.
Answer: A
QuesStatus:Revised
27) Ifyouhaveaverylowtoleranceforrisk,whichofthefollowingbondswouldyoubeleast
likelytoholdinyourportfolio?
A) aU.S.Treasurybond
B) amunicipalbond
C) acorporatebondwitharatingofAaa
D) acorporatebondwitharatingofBaa
Answer: D
QuesStatus:New
28) ThespreadbetweeninterestratesonlowqualitycorporatebondsandU.S.governmentbonds
A) widenedsignificantlyduringtheGreatDepression.
B) narrowedsignificantlyduringtheGreatDepression.
C) narrowedmoderatelyduringtheGreatDepression.
D) didnotchangeduringtheGreatDepression.
Answer: A
29) DuringtheGreatDepressionyears1930-1933therewasaveryhighrateofbusinessfailures
anddefaults,wewouldexpecttheriskpremiumfor________bondstobeveryhigh.
A) U.S.Treasury
B) corporateAaa
C) municipal
D) corporateBaa
Answer: D
QuesStatus:New
30) Riskpremiumsoncorporatebondstendto________duringbusinesscycleexpansionsand
________duringrecessions,everythingelseheldconstant.
B) increase;decrease
C) decrease;increase
D) decrease;decrease
Answer: C
QuesStatus:New
A) Aliquidassetisonethatcanbequicklyandcheaplyconvertedintocash.
B) Thedemandforabonddeclineswhenitbecomeslessliquid,decreasingtheinterestrate
spreadbetweenitandrelativelymoreliquidbonds.
C) Thedifferencesinbondinterestratesreflectdifferencesindefaultriskonly.
D) Thecorporatebondmarketisthemostliquidbondmarket.
Answer: A
QuesStatus:Revised
32) Corporatebondsarenotasliquidasgovernmentbondsbecause
A) fewercorporatebondsforanyonecorporationaretraded,makingthemmorecostlyto
sell.
B) thecorporatebondratingmustbecalculatedeachtimetheyaretraded.
C) corporatebondsarenotcallable.
D) corporatebondscannotberesold.
Answer: A
QuesStatus:Revised
33) WhentheTreasurybondmarketbecomesmoreliquid,otherthingsequal,thedemandcurve
forcorporatebondsshiftstothe________andthedemandcurveforTreasurybondsshiftsto
the________.
A) right;right
B) right;left
C) left;right
D) left;left
Answer: C
34) Adecreaseintheliquidityofcorporatebonds,otherthingsbeingequal,shiftsthedemand
curveforcorporatebondstothe________andthedemandcurveforTreasurybondsshiftsto
the________.
A) right;right
B) right;left
C) left;left
D) left;right
Answer: D
35) Anincreaseintheliquidityofcorporatebondswill________thepriceofcorporatebondsand
________theyieldofTreasurybonds,everythingelseheldconstant.
B) reduce;reduce
C) increase;reduce
D) reduce;increase
Answer: A
QuesStatus:Revised
36) Theriskpremiumoncorporatebondsreflectsthefactthatcorporatebondshaveahigher
defaultriskandare________U.S.Treasurybonds.
A) lessliquidthan
B) lessspeculativethan
C) tax-exemptunlike
D) lower-yieldingthan
Answer: A
QuesStatus:New
37) Everythingelseheldconstant,anincreaseinmarginaltaxrateswouldlikelyhavetheeffectof
________thedemandformunicipalbonds,and________thedemandforU.S.government
bonds.
A) increasing;increasing
B) increasing;decreasing
C) decreasing;increasing
D) decreasing;decreasing
Answer: B
QuesStatus:Revised
A) AnincreaseintaxrateswillincreasethedemandforTreasurybonds,loweringtheir
interestrates.
B) Becausethetax-exemptstatusofmunicipalbondswasoflittlebenefittobondholders
whentaxrateswerelow,theyhadhigherinterestratesthanU.S.governmentbonds
beforeWorldWarII.
C) Interestratesonmunicipalbondswillbehigherthancomparablebondswithoutthetax
exemption.
D) Becausecouponpaymentsonmunicipalbondsareexemptfromfederalincometax,the
expectedafter-taxreturnonthemwillbehigherforindividualsinlowerincometax
brackets.
Answer: B
QuesStatus:Revised
39) Everythingelseheldconstant,theinterestrateonmunicipalbondsrisesrelativetotheinterest
rateonTreasurysecuritieswhen
A) incometaxratesarelowered.
B) incometaxratesareraised.
C) municipalbondsbecomemorewidelytraded.
D) corporatebondsbecomeriskier.
Answer: A
QuesStatus:Revised
40) Everythingelseheldconstant,ifincometaxrateswerelowered,then
A) theinterestrateonmunicipalbondswouldfall.
B) theinterestrateonTreasurybondswouldrise.
C) theinterestrateonmunicipalbondswouldrise.
D) thepriceofTreasurybondswouldfall.
Answer: C
QuesStatus:Revised
41) Everythingelseheldconstant,abolishingalltaxeswill
A) increasetheinterestrateoncorporatebonds.
B) reducetheinterestrateonmunicipalbonds.
C) increasetheinterestrateonmunicipalbonds.
D) increasetheinterestrateonTreasurybonds.
Answer: C
QuesStatus:Revised
42) Municipalbondshavedefaultrisk,yettheirinterestratesarelowerthantherateson
default-freeTreasurybonds.Thissuggeststhat
A) thebenefitfromthetax-exemptstatusofmunicipalbondsislessthantheirdefaultrisk.
B) thebenefitfromthetax-exemptstatusofmunicipalbondsequalstheirdefaultrisk.
C) thebenefitfromthetax-exemptstatusofmunicipalbondsexceedstheirdefaultrisk.
D) Treasurybondsarenotdefault-free.
Answer: C
QuesStatus:Revised
43) Everythingelseheldconstant,ifthetax-exemptstatusofmunicipalbondswereeliminated,
then
A) theinterestratesonmunicipalbondswouldstillbelessthantheinterestrateonTreasury
bonds.
B) theinterestrateonmunicipalbondswouldequaltherateonTreasurybonds.
C) theinterestrateonmunicipalbondswouldexceedtherateonTreasurybonds.
D) theinterestratesonmunicipal,Treasury,andcorporatebondswouldallincrease.
Answer: C
QuesStatus:Revised
44) Whichofthefollowingstatementsistrue?
A) Stateandlocalgovernmentscannotdefaultontheirbonds.
B) Bondsissuedbystateandlocalgovernmentsarecalledmunicipalbonds.
C) Allgovernmentissuedbonds local,state,andfederal arefederalincometaxexempt.
D) Thecouponpaymentonmunicipalbondsisusuallyhigherthanthecouponpaymenton
Treasurybonds.
Answer: B
QuesStatus:New
45) Threefactorsexplaintheriskstructureofinterestrates:
A) liquidity,defaultrisk,andtheincometaxtreatmentofasecurity.
B) maturity,defaultrisk,andtheincometaxtreatmentofasecurity.
C) maturity,liquidity,andtheincometaxtreatmentofasecurity.
D) maturity,defaultrisk,andtheliquidityofasecurity.
Answer: A
QuesStatus:Revised
46) ThespreadbetweentheinterestratesonBaacorporatebondsandU.S.governmentbondsis
verylargeduringtheGreatDepressionyears1930 -1933.Explainthisdifferenceusingthe
bondsupplyanddemandanalysis.
Answer: DuringtheGreatDepressionmanybusinessesfailed.Thedefaultriskforthecorporate
bondincreasedcomparedtothedefault-freeTreasurybond.Thedemandforcorporate
bondsdecreasedwhilethedemandforTreasurybondsincreasedresultinginalarger
riskpremium.
QuesStatus:New
47) Ifthefederalgovernmentwheretoraisetheincometaxrates,wouldthishaveanyimpactona
statescostofborrowingfunds?Explain.
Answer: Yes,ifthefederalgovernmentraisesincometaxrates,demandformunicipalbonds
whicharefederalincometaxexemptwouldincrease.Thiswouldlowertheinterestrate
onthemunicipalbondsthusloweringthecosttothestateofborrowingfunds.
QuesStatus:New
6.2 TermStructureofInterestRates
1) Thetermstructureofinterestratesis
A) therelationshipamonginterestratesofdifferentbondswiththesamematurity.
B) thestructureofhowinterestratesmoveovertime.
C) therelationshipamongthetermtomaturityofdifferentbonds.
D) therelationshipamonginterestratesonbondswithdifferentmaturities.
Answer: D
2) Aplotoftheinterestratesondefault-freegovernmentbondswithdifferenttermstomaturity
iscalled
A) arisk-structurecurve.
B) adefault-freecurve.
C) ayieldcurve.
D) aninterest-ratecurve.
Answer: C
QuesStatus:Revised
3) Differencesin________explainwhyinterestratesonTreasurysecuritiesarenotallthesame.
A) risk
B) liquidity
C) timetomaturity
D) taxcharacteristics
Answer: C
QuesStatus:New
4) Typically,yieldcurvesare
A) gentlyupwardsloping.
B) moundshaped.
C) flat.
D) bowlshaped.
Answer: A
QuesStatus:Revised
5) Whenyieldcurvesaresteeplyupwardsloping,
A) long-terminterestratesareaboveshort-terminterestrates.
B) short-terminterestratesareabovelong-terminterestrates.
C) short-terminterestratesareaboutthesameaslong-terminterestrates.
D) medium-terminterestratesareabovebothshort-termandlong-terminterestrates.
Answer: A
QuesStatus:Revised
6) Whenyieldcurvesaredownwardsloping,
Answer: B
QuesStatus:Revised
7) Whenyieldcurvesareflat,
Answer: C
QuesStatus:Revised
8) Aninvertedyieldcurve
A) slopesup.
B) isflat.
C) slopesdown.
D) hasaUshape.
Answer: C
QuesStatus:Revised
9) Accordingtotheexpectationstheoryofthetermstructure
A) theinterestrateonlong-termbondswillexceedtheaverageofshort-terminterestrates
thatpeopleexpecttooccuroverthelifeofthelong-termbonds,becauseoftheir
preferenceforshort-termsecurities.
B) interestratesonbondsofdifferentmaturitiesmovetogetherovertime.
C) buyersofbondsprefershort-termtolong-termbonds.
D) buyersrequireanadditionalincentivetoholdlong-termbonds.
Answer: B
QuesStatus:Revised
10) Accordingtotheexpectationstheoryofthetermstructure
A) whentheyieldcurveissteeplyupwardsloping,short-terminterestratesareexpectedto
remainrelativelystableinthefuture.
B) whentheyieldcurveisdownwardsloping,short-terminterestratesareexpectedto
remainrelativelystableinthefuture.
C) investorshavestrongpreferencesforshort-termrelativetolong-termbonds,explaining
whyyieldcurvestypicallyslopeupward.
D) yieldcurvesshouldbeequallylikelytoslopedownwardasslopeupward.
Answer: D
QuesStatus:Revised
11) Iftheexpectedpathofone-yearinterestratesoverthenextfiveyearsis4percent,5percent,7
percent,8percent,and6percent,thentheexpectationstheorypredictsthattodaysinterest
rateonthefive-yearbondis
A) 4percent.
B) 5percent.
C) 6percent.
D) 7percent.
Answer: C
QuesStatus:Revised
12) Iftheexpectedpathof1-yearinterestratesoverthenextfouryearsis5percent,4percent,2
percent,and1percent,thentheexpectationstheorypredictsthattodaysinterestrateonthe
four-yearbondis
A) 1percent.
B) 2percent.
C) 3percent.
D) 4percent.
Answer: C
QuesStatus:Revised
13) Iftheexpectedpathof1-yearinterestratesoverthenextfiveyearsis1percent,2percent,3
percent,4percent,and5percent,theexpectationstheorypredictsthatthebondwiththe
highestinterestratetodayistheonewithamaturityof
A) twoyears.
B) threeyears.
C) fouryears.
D) fiveyears.
Answer: D
QuesStatus:Revised
14) Iftheexpectedpathof1-yearinterestratesoverthenextfiveyearsis2percent,4percent,1
percent,4percent,and3percent,theexpectationstheorypredictsthatthebondwiththe
lowestinterestratetodayistheonewithamaturityof
A) oneyear.
B) twoyears.
C) threeyears.
D) fouryears.
Answer: A
15) Overthenextthreeyears,theexpectedpathof1-yearinterestratesis4,1,and1percent.The
expectationstheoryofthetermstructurepredictsthatthecurrentinterestrateon3-yearbond
is
A) 1percent.
B) 2percent.
C) 3percent.
D) 4percent.
Answer: B
QuesStatus:Revised
16) Accordingtothesegmentedmarketstheoryofthetermstructure
A) theinterestrateonlong-termbondswillequalanaverageofshort-terminterestrates
thatpeopleexpecttooccuroverthelifeofthelong-termbonds.
B) buyersofbondsdonotpreferbondsofonematurityoveranother.
C) interestratesonbondsofdifferentmaturitiesdonotmovetogetherovertime.
D) buyersrequireanadditionalincentivetoholdlong-termbonds.
Answer: C
QuesStatus:Revised
17) Accordingtothesegmentedmarketstheoryofthetermstructure
A) bondsofonematurityareclosesubstitutesforbondsofothermaturities,therefore,
interestratesonbondsofdifferentmaturitiesmovetogetherovertime.
B) theinterestrateforeachmaturitybondisdeterminedbysupplyanddemandforthat
maturitybond.
C) investorsstrongpreferencesforshort-termrelativetolong-termbondsexplainswhy
yieldcurvestypicallyslopedownward.
D) becauseofthepositivetermpremium,theyieldcurvewillnotbeobservedtobe
downward-sloping.
Answer: B
QuesStatus:Revised
18) Accordingtotheliquiditypremiumtheoryofthetermstructure
A) becausebuyersofbondsmaypreferbondsofonematurityoveranother,interestrateson
bondsofdifferentmaturitiesdonotmovetogetherovertime.
B) theinterestrateonlong-termbondswillequalanaverageofshort-terminterestrates
thatpeopleexpecttooccuroverthelifeofthelong-termbondsplusatermpremium.
C) becauseofthepositivetermpremium,theyieldcurvewillnotbeobservedtobe
downwardsloping.
D) theinterestrateforeachmaturitybondisdeterminedbysupplyanddemandforthat
maturitybond.
Answer: B
QuesStatus:Revised
19) Accordingtotheliquiditypremiumtheoryofthetermstructure
A) bondsofdifferentmaturitiesarenotsubstitutes.
B) ifyieldcurvesaredownwardsloping,thenshort-terminterestratesareexpectedtofall
bysomuchthat,evenwhenthepositivetermpremiumisadded,long -termratesfall
belowshort-termrates.
C) yieldcurvesshouldneverslopedownward.
D) interestratesonbondsofdifferentmaturitiesdonotmovetogetherovertime.
Answer: B
QuesStatus:Revised
20) TheadditionalincentivethatthepurchaserofaTreasurysecurityrequirestobuyalong -term

securityratherthanashort-termsecurityiscalledthe
A) riskpremium.
B) termpremium.
C) taxpremium.
D) marketpremium.
Answer: B
QuesStatus:New
21) If1-yearinterestratesforthenextthreeyearsareexpectedtobe4,2,and3percent,andthe
3-yeartermpremiumis1percent,thanthe3-yearbondratewillbe
A) 1percent.
B) 2percent.
C) 3percent.
D) 4percent.
Answer: D
QuesStatus:Revised
22) If1-yearinterestratesforthenextfiveyearsareexpectedtobe4,2,5,4,and5percent,and
the5-yeartermpremiumis1percent,thanthe5-yearbondratewillbe
A) 2percent.
B) 3percent.
C) 4percent.
D) 5percent.
Answer: D
QuesStatus:Revised
23) Iftheyieldcurveisflatforshortmaturitiesandthenslopesdownwardforlongermaturities,
theliquiditypremiumtheory(assumingamildpreferenceforshorter-termbonds)indicates
thatthemarketispredicting.
A) ariseinshort-terminterestratesinthenearfutureandadeclinefurtheroutinthe
future.
B) constantshort-terminterestratesinthenearfutureandadeclinefurtheroutinthe
future.
C) adeclineinshort-terminterestratesinthenearfutureandarisefurtheroutinthe
future.
D) adeclineinshort-terminterestratesinthenearfutureandanevensteeperdecline
furtheroutinthefuture.
Answer: D
24) Iftheyieldcurveslopeisflat,theliquiditypremiumtheory(assumingamildpreferencefor
shorter-termbonds)indicatesthatthemarketispredicting
A) amildriseinshort-terminterestratesinthenearfutureandamilddeclinefurtheroutin
thefuture.
B) constantshort-terminterestratesinthenearfutureandfurtheroutinthefuture.
C) amilddeclineinshort-terminterestratesinthenearfutureandacontinuingmild
declinefurtheroutinthefuture.
D) constantshort-terminterestratesinthenearfutureandamilddeclinefurtheroutinthe
future.
Answer: C
25) Iftheyieldcurvehasamildupwardslope,theliquiditypremiumtheory(assumingamild
preferenceforshorter-termbonds)indicatesthatthemarketispredicting
A) ariseinshort-terminterestratesinthenearfutureandadeclinefurtheroutinthe
future.
B) constantshort-terminterestratesinthenearfutureandfurtheroutinthefuture.
C) adeclineinshort-terminterestratesinthenearfutureandarisefurtheroutinthe
future.
D) adeclineinshort-terminterestratesinthenearfutureandanevensteeperdecline
furtheroutinthefuture.
Answer: B
26) Accordingtotheliquiditypremiumtheoryofthetermstructure,asteeplyupwardsloping
yieldcurveindicatesthatshort-terminterestratesareexpectedto
A) riseinthefuture.
B) remainunchangedinthefuture.
C) declinemoderatelyinthefuture.
D) declinesharplyinthefuture.
Answer: A
QuesStatus:Revised
27) Accordingtotheliquiditypremiumtheoryofthetermstructure,aslightlyupwardsloping
yieldcurveindicatesthatshort-terminterestratesareexpectedto
A) riseinthefuture.
Answer: B
QuesStatus:Revised
28) Accordingtotheliquiditypremiumtheoryofthetermstructure,aflatyieldcurveindicates
thatshort-terminterestratesareexpectedto
A) riseinthefuture.
Answer: C
QuesStatus:Revised
29) Accordingtotheliquiditypremiumtheoryofthetermstructure,adownwardslopingyield
curveindicatesthatshort-terminterestratesareexpectedto
A) riseinthefuture.
Answer: D
QuesStatus:Revised
30) Thepreferredhabitattheoryofthetermstructureiscloselyrelatedtothe
A) expectationstheoryofthetermstructure.
B) segmentedmarketstheoryofthetermstructure.
C) liquiditypremiumtheoryofthetermstructure.
D) theinvertedyieldcurvetheoryofthetermstructure.
Answer: C
QuesStatus:Revised
31) Theexpectationstheoryandthesegmentedmarketstheorydonotexplainthefactsverywell,
buttheyprovidethegroundworkforthemostwidelyacceptedtheoryofthetermstructureof
interestrates,
A) theKeynesiantheory.
B) separablemarketstheory.
C) liquiditypremiumtheory.
D) theassetmarketapproach.
Answer: C
32) The________ofthetermstructureofinterestratesstatesthattheinterestrateonalong -term

bondwillequaltheaverageofshort-terminterestratesthatindividualsexpecttooccurover
thelifeofthelong-termbond,andinvestorshavenopreferenceforshort -termbondsrelative
tolong-termbonds.
A) segmentedmarketstheory
B) expectationstheory
C) liquiditypremiumtheory
D) separablemarketstheory
Answer: B
33) Inactualpractice,short-terminterestratesandlong-terminterestratesusuallymove
together;thisisthemajorshortcomingofthe
A) segmentedmarketstheory.
B) expectationstheory.
C) liquiditypremiumtheory.
D) separablemarketstheory.
Answer: A
QuesStatus:Revised
34) Accordingtothistheoryofthetermstructure,bondsofdifferentmaturitiesarenotsubstitutes
foroneanother.
A) Segmentedmarketstheory
B) Expectationstheory
C) Liquiditypremiumtheory
D) Separablemarketstheory
Answer: A
35) The________ofthetermstructurestatesthefollowing:theinterestrateonalong -termbond

willequalanaverageofshort-terminterestratesexpectedtooccuroverthelifeofthe
long-termbondplusatermpremiumthatrespondstosupplyanddemandconditionsforthat
bond.
Answer: C
QuesStatus:Revised
36) Aparticularlyattractivefeatureofthe________isthatittellsyouwhatthemarketis
predictingaboutfutureshort-terminterestratesbyjustlookingattheslopeoftheyieldcurve.
Answer: C
QuesStatus:Revised
37) Accordingtotheliquiditypremiumtheory,ayieldcurvethatisflatmeansthat
A) bondpurchasersexpectinterestratestoriseinthefuture.
B) bondpurchasersexpectinterestratestostaythesame.
C) bondpurchasersexpectinterestratestofallinthefuture.
D) theyieldcurvehasnothingtodowithexpectationsofbondpurchasers.
Answer: C
QuesStatus:New
38) Economistsattemptstoexplainthetermstructureofinterestrates
A) illustratehoweconomistsmodifytheoriestoimprovethemwhentheyareinconsistent
withtheempiricalevidence.
B) illustratehoweconomistscontinuetoaccepttheoriesthatfailtoexplainobserved
behaviorofinterestratemovements.
C) provethattherealworldisaspecialcasethattendstogetshortshriftintheoretical
models.
D) haveprovedentirelyunsatisfactorytodate.
Answer: A
39) Thesteeplyupwardslopingyieldcurveinthefigureaboveindicatesthat
A) short-terminterestratesareexpectedtoriseinthefuture.
B) short-terminterestratesareexpectedtofallmoderatelyinthefuture.
C) short-terminterestratesareexpectedtofallsharplyinthefuture.
D) short-terminterestratesareexpectedtoremainunchangedinthefuture.
Answer: A
40) Thesteeplyupwardslopingyieldcurveinthefigureaboveindicatesthat________interest
ratesareexpectedto________inthefuture.
A) short-term;rise
B) short-term;fallmoderately
C) short-term;remainunchanged
D) long-term;fallmoderately
Answer: A
QuesStatus:Revised
41) TheU-shapedyieldcurveinthefigureaboveindicatesthatshort-terminterestratesare
expectedto
A) riseinthenear-termandfalllateron.
B) fallsharplyinthenear-termandriselateron.
C) fallmoderatelyinthenear-termandriselateron.
D) remainunchangedinthenear-termandriselateron.
Answer: B
42) TheU-shapedyieldcurveinthefigureaboveindicatesthattheinflationrateisexpectedto
A) remainconstantinthenear-termandfalllateron.
B) fallsharplyinthenear-termandriselateron.
C) risemoderatelyinthenear-termandfalllateron.
D) remainconstantinthenear-termandriselateron.
Answer: B
QuesStatus:Revised
43) TheinvertedU-shapedyieldcurveinthefigureaboveindicatesthatshort-terminterestrates
areexpectedto
A) riseinthenear-termandfalllateron.
B) fallmoderatelyinthenear-termandriselateron.
C) fallsharplyinthenear-termandriselateron.
D) remainunchangedinthenear-termandfalllateron.
Answer: A
QuesStatus:Revised
44) TheinvertedU-shapedyieldcurveinthefigureaboveindicatesthattheinflationrateis
expectedto
A) remainconstantinthenear-termandfalllateron.
B) fallmoderatelyinthenear-termandriselateron.
C) risemoderatelyinthenear-termandfalllateron.
D) remainunchangedinthenear-termandriselateron.
Answer: C
QuesStatus:StudyGuide
45) Aninvertedyieldcurvepredictsthatshort-terminterestrates
A) areexpectedtoriseinthefuture.
B) willriseandthenfallinthefuture.
C) willremainunchangedinthefuture.
D) willfallinthefuture.
Answer: D
QuesStatus:Revised
46) Whenshort-terminterestratesareexpectedtofallsharplyinthefuture,theyieldcurvewill
A) slopeup.
B) beflat.
C) beinverted.
D) beaninvertedUshape.
Answer: C
QuesStatus:Revised
47) Ifinvestorsexpectinterestratestofallsignificantlyinthefuture,theyieldcurvewillbe
inverted.Thismeansthattheyieldcurvehasa________slope.
A) steepupward
B) slightupward
C) flat
D) downward
Answer: D
QuesStatus:New
48) Ifexpectationsoftheinflationrateincrease,whatwouldyouexpecttohappentotheshapeof
theyieldcurve?Why?
Answer: Theyieldcurveshouldhaveasteepupwardslope.Nominalinterestrateswillincrease
iftheinflationrateincreases,therefore,bondpurchaserswillrequireahigherterm
premiumtoholdtheriskierlong-termbond.
QuesStatus:New

238177668012

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

238177668012

Hochgeladen von

Copyright:

Verfügbare Formate

Chapter6

20) TheadditionalincentivethatthepurchaserofaTreasurysecurityrequirestobuyalong -term

32) The________ofthetermstructureofinterestratesstatesthattheinterestrateonalong -term

35) The________ofthetermstructurestatesthefollowing:theinterestrateonalong -termbond

Das könnte Ihnen auch gefallen