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Which of the following statements is true A Interest rates on bonds of different maturities tend...
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...
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.
drop down option the same for all questions Which tend to be more volatile, short- or...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury...
Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury securities: Maturity (Years) Yield (%) 1 5.5 5 10 20 30 5.0 4.7 4.4 3.8 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve will draw itself. Tool tip: Mouse over the points on the graph to see their coordinates. INTEREST...
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...
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine....
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine. Actions that lower short-term interest rates will always lower long-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States
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...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest rates than high coupon bonds, other things held constant. O O True False There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is lowest for AAA-rated bonds, and required returns increase as the bond ratings get lower. O True or False What's TRUE regarding long-term and short-term bonds (assume they have the same par...
Which of the following statements is correct? If expected inflation increases, interest rates are likely to...
Which of the following statements is correct? If expected inflation increases, interest rates are likely to decrease. If individuals in general increase the percentage of their income that they save, interest rates are likely to decrease. If companies have fewer good investment opportunities, interest rates are likely to increase. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. Interest rates on long-term bonds are...
The first blank options are (a downward-sloping, a humped, and an upward-sloping) 5. Drawing a yield...
The
first blank options are (a downward-sloping, a humped, and an
upward-sloping)
5. Drawing a yield curve Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury securities: Maturity (Years) Yield (%) 1 2.0 5 3.1 10 3.8 20 4.6 30 5.5 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury securities: Maturity (Years) Yield (%) 1 5.5 5 10 20 30 5.0 4.7 4.4 3.8 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve will draw itself. Tool tip: Mouse over the points on the graph to see their coordinates. INTEREST...
Statements True False When the Fed increases the money supply, short-term interest rates tend to dedine. Actions that lower short-term interest rates will always lower long-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve Board has a significant influence over the level of economic activity, inflation, interest rates in the United States
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...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest rates than high coupon bonds, other things held constant. O O True False There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is lowest for AAA-rated bonds, and required returns increase as the bond ratings get lower. O True or False What's TRUE regarding long-term and short-term bonds (assume they have the same par...
The
first blank options are (a downward-sloping, a humped, and an
upward-sloping)
5. Drawing a yield curve Given the indicated maturities listed in the following table, assume the following yields for U.S. Treasury securities: Maturity (Years) Yield (%) 1 2.0 5 3.1 10 3.8 20 4.6 30 5.5 On the following graph, plot the yield curve implied by these interest rates. Place a blue point (circle symbol) at each maturity and interest rate in the table, and the yield curve...
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