Which statement about the term structure of interest rates is not correct? A. plots spot rates...
Which statement about the term structure of interest rates is not correct?
A. plots spot rates as a function of maturities
B. usually is upward sloping, but can take many shapes from time to time
C. is humped when intermediate term pure discount bonds have a lower return than either the shorter term or longer term bonds
D. is flat if all spot rates are the same
Homework Answers
is humped when intermediate term pure discount bonds have a lower return than either the shorter term or longer term bonds
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Which statement about the term structure of interest rates is
not correct?
A. plots spot rates...
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 yields on long-term bonds are lower than the yields on short-term bonds, the term structure...
If yields on long-term bonds are lower than the yields on short-term bonds, the term structure is said to be Question 10 options: upward sloping downward sloping flat humped
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, long-term spot rates are totally unrelated to expectations of future short-term rates. the term structure must always be upward sloping. investors prefer certain maturities and will not normally switch out of those maturities. long-term spot rates are higher than the average of current and expected future short-term rates. 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.
1) When lenders are fully aware of the effects of inflation and adjust interest rates to...
1) When lenders are fully aware of the effects of inflation and adjust interest rates to compensate for anticipated levels of price inflation, they are exemplifying the pattern of behavior known as Select one: A. complete illusion. B. adaptive lag. C. rational expectations. D. irrational exuberance. 2) The yield curve is considered to be normally shaped when it is Select one: A. upward sloping, with longer-term yields higher than shorter-term yields. B. downward sloping, with shorter-term yields higher than longer-term...
Suppose the term structure of interest rates has these spot interest rates: r1 = 6.5%. r2...
Suppose the term structure of interest rates has these spot interest rates: r1 = 6.5%. r2 = 6.3%, r3 = 6.1%, and r4 = 5.9%. a. What will be the 1-year spot interest rate in three years if the expectations theory of term structure is correct? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 1-year spot in 3 years % b. If investing in long-term bonds carries additional risks, then how would...
Suppose the term structure of interest rates has these spot interest rates: rı = 5.00%, r2...
Suppose the term structure of interest rates has these spot interest rates: rı = 5.00%, r2 = 5.40%, r3 = 5.70%, r4 = 5.90% and r5 = 6.00%. a. What will be the 1-year spot interest rate in three years if the expectations theory of term structure is correct? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 1-year spot in 3 years b. If investing in long-term bonds carries additional risks, then...
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...
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...
The term structure of interest rates: Graphs the level of corporate bond rates based on default...
The term structure of interest rates: Graphs the level of corporate bond rates based on default risk premiums and maturity. Graphs the coupon rate, current yield, and yield to maturity of a bond. Graphs the level of interest rates by maturity and is usually upward-sloping. Graphs the level of coupons by maturity and is also called a yield curve.
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 default is lower on long term bonds than on short term goals. B. Reinvestment rate is lower, other things held constant, on long term in short term bonds. C. According to the market segmentation theory of the term structure of interest rates, we should normally expect the yield curve to slowe downward....
Suppose the term structure of interest rates has these spot interest rates: rı = 5.00%, r2 = 5.40%, r3 = 5.70%, r4 = 5.90% and r5 = 6.00%. a. What will be the 1-year spot interest rate in three years if the expectations theory of term structure is correct? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) 1-year spot in 3 years b. If investing in long-term bonds carries additional risks, then...
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...
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