According to the liquidity premium theory of interest rates, long-term spot rates are totally unrelated to...
According to the liquidity premium theory of interest rates,
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long-term spot rates are totally unrelated to expectations of future short-term rates. |
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the term structure must always be upward sloping. |
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investors prefer certain maturities and will not normally switch out of those maturities. |
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long-term spot rates are higher than the average of current and expected future short-term rates. |
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investors are indifferent between different maturities if the long-term spot rates are equal to the average of current and expected future short-term rates. |
Homework Answers
Option d is correct option . long-term spot rates are higher
than the average of current and expected future short-term
rates.
Other options is incorrect.
Add Answer to:
According to the liquidity premium theory of interest rates,
long-term spot rates are totally unrelated to...
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...
If the expectations theory of the term structure of interest rates is correct, and if the...
If the expectations theory of the term structure of interest
rates is correct, and if the other term structure theories are
invalid, and we observe a downward sloping yield curve, which of
the following is a true statement? and why?
Investors expect short-term rates to be constant over time. Investors expect short-term rates to increase in the future. Investors expect short-term rates to decrease in the future. It is impossible to say unless we know whether investors require a positive...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on...
Which of the following is correct? A. The maturity premiums embedded in the interest rates on us treasury securities are due primarily to the fact that the probability of default is lower on long-term bonds than on short-term goals. B. If the maturity risk premium were zero and the rate of inflation were expected to increase in the future, then the yield curve for us treasurt securities would, other things held constant, have an upward slope. C. According to the...
Write down an equation representing the liquidity premium theory of the term structure of interest rates....
Write down an equation representing the liquidity premium theory of the term structure of interest rates. Based on this theory, explain how the yields on short-term and medium-term government bonds are related.
Since yield curves are usually upward sloping, the ________ indicates that, on average, people tend to...
Since yield curves are usually upward sloping, the ________ indicates that, on average, people tend to prefer holding short-term bonds to long-term bonds. market segmentation theory. expectations theory. liquidity premium theory. both A and B of the above. both A and C of the above.
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve Theory None of the above fequitymarkets are strong form Micient Investors should chose quity portfolios randomly Investors should put money only in professionally managed equity portfolios Investors should not invest in equity securities Investors should invest in stocks with high P raties Investors should form portfolios that are well diversified and appropriate for their own levels of risk tolerance TO To apply the Dividend...
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope...
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope of the yield curve depends on the expected future path of short-term rates. the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds. the yield curve should usually be upward-sloping. A. B. D.
An economist expects short-term rates to remain unchanged over the next several years. The economist would...
An economist expects short-term rates to remain unchanged over the next several years. The economist would most likely predict an upward sloping yield curve if he believes which term structure theory applies? a) Local expectations theory. b) Liquidity preference theory. c) Unbiased expectations theory. ОА OB OC QUESTION 41 If the spot rate curve is upward sloping, then: a) The forward curve lies above the spot curve and the yield to maturity will be lower than the spot rate with...
If the expectation of short-term interest rate remains the same in the future, the expectations theory...
If the expectation of short-term interest rate remains the same in the future, the expectations theory predicts that the yield curve will be while the liquidity preference theory predicts that the yield curve will be_ A B. C. D. Flat; flat Upward sloping; upward sloping Flat; upward sloping Upward sloping; flat The market capitalization rate on the stock of Aberdeen Wholesale Company is 12%. Its expected ROE is 10% am dots expected EPS is $3.00. if the firm's plow-back ratio...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual sell bonds causing interest rates to fall B. Individuals sell bonds causing interest rates to rise C. Individuals buy bond causing interest rates to fall D. Individuals buy bonds causing interest rates to rise 31. If the money demand curve shifts to the left. Interest rates ----and bond prices A. Fall; rise B. Fall; fall C. Rise; rise D. Rise;fall 32. When the growth...
If the expectations theory of the term structure of interest
rates is correct, and if the other term structure theories are
invalid, and we observe a downward sloping yield curve, which of
the following is a true statement? and why?
Investors expect short-term rates to be constant over time. Investors expect short-term rates to increase in the future. Investors expect short-term rates to decrease in the future. It is impossible to say unless we know whether investors require a positive...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve Theory None of the above fequitymarkets are strong form Micient Investors should chose quity portfolios randomly Investors should put money only in professionally managed equity portfolios Investors should not invest in equity securities Investors should invest in stocks with high P raties Investors should form portfolios that are well diversified and appropriate for their own levels of risk tolerance TO To apply the Dividend...
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope of the yield curve depends on the expected future path of short-term rates. the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds. the yield curve should usually be upward-sloping. A. B. D.
An economist expects short-term rates to remain unchanged over the next several years. The economist would most likely predict an upward sloping yield curve if he believes which term structure theory applies? a) Local expectations theory. b) Liquidity preference theory. c) Unbiased expectations theory. ОА OB OC QUESTION 41 If the spot rate curve is upward sloping, then: a) The forward curve lies above the spot curve and the yield to maturity will be lower than the spot rate with...
If the expectation of short-term interest rate remains the same in the future, the expectations theory predicts that the yield curve will be while the liquidity preference theory predicts that the yield curve will be_ A B. C. D. Flat; flat Upward sloping; upward sloping Flat; upward sloping Upward sloping; flat The market capitalization rate on the stock of Aberdeen Wholesale Company is 12%. Its expected ROE is 10% am dots expected EPS is $3.00. if the firm's plow-back ratio...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual sell bonds causing interest rates to fall B. Individuals sell bonds causing interest rates to rise C. Individuals buy bond causing interest rates to fall D. Individuals buy bonds causing interest rates to rise 31. If the money demand curve shifts to the left. Interest rates ----and bond prices A. Fall; rise B. Fall; fall C. Rise; rise D. Rise;fall 32. When the growth...
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