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:
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Bonds of different maturity are close substitutes, implying that their interest rates move together over time. |
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Due to the liquidity premium effect, the yield curve will likely be positively sloped. |
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Investors' strong preferences for short-term relative to long-term bonds explains why Yield curves typically slope upwards. |
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The interest rates among assets of different maturity are unrelated. |
Homework Answers
The statement that is not consistent is Bonds of different maturity are close substitutes, implying that their interest rates move together over time. The segmented market theory suggests that bonds with different maturities are not substitutes at all.
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The following are statements consistent with the Segmented Markets Theory of the term structure on interest...
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 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...
Which selection below, best explains why yield curves are almost never flat, but rather have an...
Which selection below, best explains why yield curves are almost never flat, but rather have an upward slope? This selection also is associated with the term structure of interest rates. Group of answer choices: Expectations theory Segmented markets theory Theory of quantum mechanics Liquidity premium theory
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...
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...
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...
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.
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...
Part Il Multiple chalet Ple a s h poed 1. Which of the following is a...
Part Il Multiple chalet Ple a s h poed 1. Which of the following is a chanc e of market A large number of value-maximizing investors No barriers to trading exist TO Renerally asus slowly at Value Transaction costs are minimal or non-existent Investors should expect to earn fair rates of return on their investments 2. The Efficient Markets Hypothesis Has been proved in all forms Has been proved in the weak form, but not others Has been proved in...
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...
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...
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...
Part Il Multiple chalet Ple a s h poed 1. Which of the following is a chanc e of market A large number of value-maximizing investors No barriers to trading exist TO Renerally asus slowly at Value Transaction costs are minimal or non-existent Investors should expect to earn fair rates of return on their investments 2. The Efficient Markets Hypothesis Has been proved in all forms Has been proved in the weak form, but not others Has been proved in...
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