B) False
Correct Answer
verified
Correct Answer
verified
A) 1.14%
B) 1.83%
C) 1.82%
D) 1.19%
E) 1.50%
G) B) and D)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) The yield curve for U.S.Treasury securities will be upward sloping.
B) A 5-year corporate bond must have a lower yield than a 5-year Treasury security.
C) A 5-year corporate bond must have a lower yield than a 7-year Treasury security.
D) The real risk-free rate cannot be constant if inflation is not expected to remain constant.
E) This problem assumed a zero maturity risk premium,but that is probably not valid in the real world.
G) B) and C)
Correct Answer
verified
Correct Answer
verified
A) Prices and interest rates would both rise.
B) Prices would rise and interest rates would decline.
C) Prices and interest rates would both decline.
D) Prices would decline and interest rates would rise.
E) There is no reason to expect a change in either prices or interest rates.
G) A) and B)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) 7.30%
B) 7.85%
C) 7.69%
D) 6.91%
E) 5.96%
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) Long-term interest rates are more volatile than short-term rates.
B) Inflation is expected to decline in the future.
C) The economy is not in a recession.
D) Long-term bonds are a better buy than short-term bonds.
E) Maturity risk premiums could help to explain the yield curve's upward slope.
G) B) and C)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) 1.89
B) 2.28
C) 2.05
D) 2.07
E) 1.72
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) If the maturity risk premium (MRP) is greater than zero,the Treasury bond yield curve must be upward sloping.
B) If the maturity risk premium (MRP) equals zero,the Treasury bond yield curve must be flat.
C) If inflation is expected to increase in the future and the maturity risk premium (MRP) is greater than zero,the Treasury bond yield curve must be upward sloping.
D) If the expectations theory holds,the Treasury bond yield curve will never be downward sloping.
E) Because long-term bonds are riskier than short-term bonds,yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds.
G) B) and C)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) The higher the maturity risk premium,the higher the probability that the yield curve will be inverted.
B) The most likely explanation for an inverted yield curve is that investors expect inflation to increase.
C) The most likely explanation for an inverted yield curve is that investors expect inflation to decrease.
D) If the yield curve is inverted,short-term bonds have lower yields than long-term bonds.
E) Inverted yield curves can exist for Treasury bonds,but because of default premiums,the corporate yield curve can never be inverted.
G) None of the above
Correct Answer
verified
Correct Answer
verified
A) Downward sloping yield curves are inconsistent with the expectations theory.
B) The actual shape of the yield curve depends only on expectations about future inflation.
C) If the pure expectations theory is correct,a downward sloping yield curve indicates that interest rates are expected to decline in the future.
D) If the yield curve is upward sloping,the maturity risk premium must be positive and the inflation rate must be zero.
E) Yield curves must be either upward or downward sloping - they cannot first rise and then decline.
G) A) and B)
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
B) False
Correct Answer
verified
Correct Answer
verified
A) The maturity premiums embedded in the interest rates on U.S.Treasury securities are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds.
B) Reinvestment rate risk is lower,other things held constant,on long-term than on short-term bonds.
C) The pure expectations theory of the term structure states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis,and as a result,the yield curve is normally upward sloping.
D) If the maturity risk premium were zero and interest rates were expected to decrease in the future,then the yield curve for U.S.Treasury securities would,other things held constant,have an upward slope.
E) Liquidity premiums are generally higher on Treasury than on corporate bonds.
G) A) and C)
Correct Answer
verified
Correct Answer
verified
A) 0.94%
B) 1.08%
C) 1.15%
D) 0.95%
E) 1.25%
G) C) and D)
Correct Answer
verified
Correct Answer
verified
A) Inflation is expected to decline in the future.
B) The economy is not in a recession.
C) Long-term bonds are a better buy than short-term bonds.
D) Maturity risk premiums could help to explain the yield curve's upward slope.
E) Long-term interest rates are more volatile than short-term rates.
G) B) and E)
Correct Answer
verified
Correct Answer
verified
A) If 2-year Treasury bond rates exceed 1-year rates,then the market must expect interest rates to rise.
B) If both 2-year and 3-year Treasury rates are 7%,then 5-year rates must also be 7%.
C) If 1-year rates are 6% and 2-year rates are 7%,then the market expects 1-year rates to be 6.5% in one year.
D) Reinvestment rate risk is higher on long-term bonds,and interest rate (price) risk is higher on short-term bonds.
E) Interest rate (price) risk and reinvestment rate risk are relevant to investors in corporate bonds,but these concepts do not apply to Treasury bonds.
G) C) and D)
Correct Answer
verified
Correct Answer
verified
Showing 21 - 40 of 76
Related Exams