Homework Answers
Liquidity premium theory says that bonds of different maturities are substitutes, but are not perfect substitutes.
Expectations theory says that bonds of different maturities are perfect substitutes.
Segmented market theory says that bonds of different maturities are not substitutes at all.
Answer: Option (D) i.e., segmented market theory.
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Question 6 10 pts Which theory suggests that bonds with different maturities are not substitutes at...
Which of the following best describes the segmented markets theory? _______ A) It assumes that bonds...
Which of the following best describes the segmented markets theory? _______ A) It assumes that bonds with different maturities are near perfect substitutes. B) It provides a good explanation for why yield curves are always positive. C) It demonstrates that lenders always prefer to invest for only short periods of time. D) It assumes that investors have different investment objectives and horizons.
Match each of the following theories with its description. (Enter a value: 1-4) Theory Expectations theory...
Match each of the following theories with its description. (Enter a value: 1-4) Theory Expectations theory Preferred habitat Segmented markets Description 1. The interest rate for each bond with a different maturity is determined by the supply of and demand for that bond, with no effects from expected returns on other bonds with other matunities. 2. The interest rate on a long-term bond will equal an average of the short-term interest rates that people expect to occur over the life...
Which of the following statements is true A Interest rates on bonds of different maturities tend...
Which of the following statements is true A Interest rates on bonds of different maturities tend to move together over time O B. Yield curves almost always slope downward. O c. when short-term interest rates are low. yield curves tend to be inverted. D. When short-term interest rates are high, yield curves tend to be upward sloping According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield...
The following are statements consistent with the Segmented Markets Theory of the term structure on interest...
The following are statements consistent with the Segmented Markets Theory of the term structure on interest rates, EXCEPT: Question 9 options: Bonds of different maturity are close substitutes, implying that their interest rates move together over time. Due to the liquidity premium effect, the yield curve will likely be positively sloped. Investors' strong preferences for short-term relative to long-term bonds explains why Yield curves typically slope upwards. The interest rates among assets of different maturity are unrelated.
10 The following is a list of prices for zero-coupon bonds with different maturities and par...
10 The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000 Maturity (years) Price $925.16 $862.57 $788.66 $711.00 1 2 3 What is, according to the expectations theory, the expected forward rate in the third year? A) B) 7.23% 9.37% 8.85% 10.9%
In 2016, when the interest rate on 10-year German government bonds became negative, an article in...
In 2016, when the interest rate on 10-year German government bonds became negative, an article in the Wall Street Journal noted that the interest rate on 10-year bonds depended in part on investors' expectations of future short-term interest rates. The article also noted that open double quote“investors don't seem to have changed their perception of ... [short-term] interest rates in the future ....close double quote” Source: Jon Sindreu, open double quote“Are German Bonds Riding a Bubble?close double quote” Wall Street...
Which of the following statements about the term structure of interest rates is incorrect? A. According...
Which of the following statements about the term structure of interest rates is incorrect? A. According to the Liquidity Preference Theory, long-term interest rates are usually higher than short-term interest rates. B. The Market Segmentation Theory posits that bonds of different maturities are traded by different investors and their prices/yields are determined separately. C. The Pure Expectations Theory asserts that the yield curve is explained solely by investors' interest rate expectations. D. According to the Pure Expectations Theory, an upward...
Question 29 (1 point) 6. The relevant market structure under deregulation is described by a theory...
Question 29 (1 point) 6. The relevant market structure under deregulation is described by a theory which substitutes potential competition for the active participation of many sellers. In other words, the threat of possible new carrier entering the market keeps the existing services and the prices reasonable. What is this theory called? The law of supply and demand. Marginal utility Monopolistic competition. Contestable markets. None of these are correct as the concept is not recognized.
D Question5 10 pts If market interest rates rise: O short-term bonds will decline in value...
D Question5 10 pts If market interest rates rise: O short-term bonds will decline in value more than long-term bonds O long-term bonds will decline in value more than short-term bonds. O long-term bonds will rise in value more than short-term bonds. O short-term bonds will rise in value more than long-term bonds D Question 6 5 pts Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay...
Please help with these questions Question 10 0.4 pts According to adaptive expectations theory, when inflation...
Please help with these questions
Question 10 0.4 pts According to adaptive expectations theory, when inflation accelerates O people change to rational expectations. O people underestimate inflation. O people correctly estimate inflation. unemployment must increase. people overestimate inflation. Question 11 0.4 pts An increase in long-run aggregate supply can be expected to_the price evel and the natural rate of unemployment. Ohave no effect on; increase O decrease; have no effect on decrease: decrease Ohave no effect on; have no effect...
Match each of the following theories with its description. (Enter a value: 1-4) Theory Expectations theory Preferred habitat Segmented markets Description 1. The interest rate for each bond with a different maturity is determined by the supply of and demand for that bond, with no effects from expected returns on other bonds with other matunities. 2. The interest rate on a long-term bond will equal an average of the short-term interest rates that people expect to occur over the life...
Which of the following statements is true A Interest rates on bonds of different maturities tend to move together over time O B. Yield curves almost always slope downward. O c. when short-term interest rates are low. yield curves tend to be inverted. D. When short-term interest rates are high, yield curves tend to be upward sloping According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield...
10 The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000 Maturity (years) Price $925.16 $862.57 $788.66 $711.00 1 2 3 What is, according to the expectations theory, the expected forward rate in the third year? A) B) 7.23% 9.37% 8.85% 10.9%
Question 29 (1 point) 6. The relevant market structure under deregulation is described by a theory which substitutes potential competition for the active participation of many sellers. In other words, the threat of possible new carrier entering the market keeps the existing services and the prices reasonable. What is this theory called? The law of supply and demand. Marginal utility Monopolistic competition. Contestable markets. None of these are correct as the concept is not recognized.
D Question5 10 pts If market interest rates rise: O short-term bonds will decline in value more than long-term bonds O long-term bonds will decline in value more than short-term bonds. O long-term bonds will rise in value more than short-term bonds. O short-term bonds will rise in value more than long-term bonds D Question 6 5 pts Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay...
Please help with these questions
Question 10 0.4 pts According to adaptive expectations theory, when inflation accelerates O people change to rational expectations. O people underestimate inflation. O people correctly estimate inflation. unemployment must increase. people overestimate inflation. Question 11 0.4 pts An increase in long-run aggregate supply can be expected to_the price evel and the natural rate of unemployment. Ohave no effect on; increase O decrease; have no effect on decrease: decrease Ohave no effect on; have no effect...
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