A) the framework of exactly how interemainder rates relocate over time. B) the relationship among interest rates of different bonds via the exact same maturity. C) the partnership among the term to maturity of various bonds. D) the relationship among interest prices on bonds with different maturities.

The risk that interest payments will certainly not be made, or that the face value of a bond is not repaid as soon as a bond matures is

A) interemainder price risk. B) inflation hazard. C) liquidity threat. D) default threat.

Bonds through no default threat are called

A) flower bonds. B) no-threat bonds. C) default-totally free bonds. D) zero-threat bonds.

Which of the adhering to bonds are thought about to be default-threat free?

A) municipal bonds B) investment-grade bonds C) UNITED STATE Treasury bonds D) junk bonds

U.S. federal government bonds have no default hazard because

A) they are issued in strictly restricted amounts. B) the federal federal government can increase taxes or print money to pay its duties. C) they are backed with gold reserves. D) they have the right to be exadjusted for silver at any type of time.

The spread in between the interest rates on bonds via default hazard and also default-free bonds is referred to as the

A) threat premium. B) junk margin. C) bond margin. D) default premium.

If the probcapacity of a bond default boosts because corporations start to suffer large losses, then the default hazard on corporate bonds will ________ and also the intended return on these bonds will ________, whatever else hosted constant.

You are watching: Bonds with relatively high risk of default are called

A) decrease; rise B) decrease; decrease C) increase; boost D) increase; decrease

A bond with default danger will constantly have a ________ threat premium and also an increase in its default risk will certainly ________ the threat premium.

A) positive; raise B) positive; reduced C) negative; raise D) negative; lower

If a corporation starts to experience big losses, then the default threat on the corporate bond will

A) increase and the bond"s rerotate will certainly come to be more uncertain, interpretation the meant rerotate on the corpoprice bond will certainly loss. B) increase and the bond"s rerotate will certainly become less unparticular, interpretation the meant return on the corpoprice bond will certainly fall. C) decrease and the bond"s rerotate will certainly become less unspecific, definition the intended rerevolve on the corporate bond will loss. D) decrease and also the bond"s rerevolve will come to be much less uncertain, definition the supposed return on the corporate bond will climb.

If the possibility of a default rises because corporations begin to suffer losses, then the default risk on corporate bonds will ________, and also the bonds" returns will certainly end up being ________ unparticular, meaning that the meant return on these bonds will certainly decrease, everything else organized continuous.

A) increase; less B) increase; even more C) decrease; much less D) decrease; more

Other things being equal, a boost in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and also the demand also curve for Treasury bonds to the ________.

A) right; ideal B) right; left C) left; best D) left; left

Other points being equal, a decrease in the default threat of corporate bonds shifts the demand also curve for corpoprice bonds to the ________ and also the demand curve for Treasury bonds to the ________.

A) right; right B) right; left C) left; right D) left; left

A(n) ________ in the riskiness of corporate bonds will certainly ________ the price of corpoprice bonds and ________ the yield on corpoprice bonds, all else equal.

A) increase; increase; rise B) increase; decrease; increase C) decrease; increase; boost D) decrease; decrease;decrease

An rise in the riskiness of corpoprice bonds will ________ the price of corporate bonds and also ________ the price of Treasury bonds, every little thing else hosted continuous.

A) increase; boost B) reduce; alleviate C) reduce; rise D) increase; reduce

A decrease in the riskiness of corporate bonds will ________ the price of corpoprice bonds and ________ the price of Treasury bonds, every little thing else organized constant.

A) increase; increase B) reduce; minimize C) reduce; rise D) increase; reduce

An increase in the riskiness of corpoprice bonds will ________ the yield on corpoprice bonds and also ________ the yield on Treasury securities, every little thing else organized continuous.

A) increase; boost B) reduce; mitigate C) increase; mitigate D) reduce; rise

A decrease in the riskiness of corporate bonds will certainly ________ the yield on corpoprice bonds and ________ the yield on Treasury securities, every little thing else organized continuous.

A) increase; rise B) decrease; decrease C) increase; decrease D) decrease; boost

An rise in default threat on corpoprice bonds ________ the demand also for these bonds, yet ________ the demand also for default-cost-free bonds, everything else organized continuous.

A) increases; lowers B) lowers; increases C) does not change; greatly boosts D) moderately lowers; does not change

A decrease in default danger on corporate bonds ________ the demand for these bonds, and also ________ the demand also for default-totally free bonds, whatever else hosted continuous.

A) increases; lowers B) lowers; boosts C) does not change; greatly boosts D) moderately lowers; does not change

As default danger boosts, the meant rerevolve on corporate bonds ________, and also the rerevolve becomes ________ uncertain, every little thing else hosted consistent.

A) increases; less B) increases; even more C) decreases; less D) decreases; even more

As default hazard decreases, the meant rerevolve on corpoprice bonds ________, and also the return becomes ________ unparticular, everything else organized consistent.

A) increases; less B) increases; more C) decreases; less D) decreases; even more

As their relative riskiness ________, the supposed return on corporate bonds ________ relative to the expected return on default-free bonds, whatever else hosted constant.

A) increases; rises B) increases; decreases C) decreases; decreases D) decreases; does not change

Which of the adhering to statements are TRUE?

A) A decrease in default risk on corpoprice bonds lowers the demand also for these bonds, however rises the demand also for default-complimentary bonds. B) The expected rerevolve on corporate bonds decreases as default danger increases. C) A corpoprice bond"s return becomes less unspecific as default danger boosts. D) As their relative riskiness rises, the supposed return on corporate bonds rises relative to the supposed return on default-totally free bonds.

Everypoint else organized consistent, if the federal federal government were to guarantee now that it will certainly pay creditors if a corporation goes bankrupt in the future, the interest price on corporate bonds will certainly ________ and also the interemainder rate on Treasury securities will ________.

A) increase; boost B) increase; decrease C) decrease; rise D) decrease; decrease

Bonds through relatively high hazard of default are called

A) Brady bonds. B) junk bonds. C) zero coupon bonds. D) investment grade bonds.

Junk bonds, bonds with a low bond rating, are also known as

A) high-yield bonds. B) investment grade bonds. C) high high quality bonds. D) zero-coupon bonds.

Bonds via fairly low danger of default are called ________ securities and have a rating of Baa (or BBB) and above; bonds with ratings below Baa (or BBB) have actually a greater default danger and are called ________.

A) investment grade; reduced grade B) investment grade; junk bonds C) high quality; reduced grade D) high quality; junk bonds

Which of the adhering to bonds would certainly have actually the highest default risk?

A) municipal bonds B) investment-grade bonds C) U.S. Treasury bonds D) junk bonds

Which of the adhering to irreversible bonds has the highest interest rate?

A) corporate Baa bonds B) UNITED STATE Treasury bonds C) corporate Aaa bonds D) municipal bonds

Which of the following securities has the lowest interemainder rate?

A) junk bonds B) UNITED STATE Treasury bonds C) investment-grade bonds D) corporate Baa bonds

The spreview in between interemainder prices on low top quality corporate bonds and UNITED STATE government bonds

A) widened considerably throughout the Great Depression. B) narrowed substantially in the time of the Great Depression. C) narrowed moderately throughout the Great Depression. D) did not adjust during the Great Depression.

Throughout the Great Depression years 1930-1933 there was a very high price of service failures and also defaults, we would certainly mean the threat premium for ________ bonds to be very high.

A) U.S. Treasury B) corporate Aaa C) municipal D) corpoprice Baa

Risk premiums on corporate bonds tend to ________ during service cycle expansions and ________ during recessions, every little thing else organized consistent.

A) increase; rise B) increase; decrease C) decrease; rise D) decrease; decrease

The collapse of the subprime mortgage market

A) did not influence the corpoprice bond market. B) boosted the viewed riskiness of Treasury securities. C) lessened the Baa-Aaa spread. D) increased the Baa-Aaa spcheck out.

The collapse of the subprime mortgage market increased the spread between Baa and default-totally free UNITED STATE Treasury bonds. This is due to

A) a reduction in risk. B) a reduction in maturity. C) a flight to top quality. D) a flight to liquidity.

Throughout a "flight to quality"

A) the spreview in between Treasury bonds and Baa bonds boosts. B) the spreview between Treasury bonds and Baa bonds decreases. C) the spread in between Treasury bonds and Baa bonds is not influenced. D) the change in the spread in between Treasury bonds and Baa bonds cannot be predicted.

If you have actually a really low tolerance for risk, which of the complying with bonds would certainly you be least most likely to host in your portfolio?

A) a UNITED STATE Treasury bond B) a municipal bond C) a corporate bond via a rating of Aaa D) a corporate bond through a rating of Baa

Which of the following statements is TRUE?

A) A liquid asset is one that can be quickly and also cheaply converted right into cash. B) The demand also for a bond declines when it becomes much less liquid, decreasing the interest rate spread between it and also relatively even more liquid bonds. C) The distinctions in bond interemainder rates reflect distinctions in default danger just. D) The corpoprice bond market is the most liquid bond sector.

Corpoprice bonds are not as liquid as government bonds because

A) fewer corpoprice bonds for any type of one corporation are traded, making them even more costly to sell. B) the corpoprice bond rating have to be calculated each time they are traded. C) corporate bonds are not callable. D) corporate bonds cannot be resold.

When the Treasury bond sector becomes even more liquid, other things equal, the demand also curve for corporate bonds shifts to the ________ and the demand curve for Treasury bonds shifts to the ________.

A) right; best B) right; left C) left; ideal D) left; left

When the Treasury bond industry becomes much less liquid, various other points equal, the demand curve for corporate bonds shifts to the ________ and also the demand curve for Treasury bonds shifts to the ________.

A) right; ideal B) right; left C) left; best D) left; left

A decrease in the liquidity of corporate bonds, other things being equal, shifts the demand also curve for corpoprice bonds to the ________ and also the demand curve for Treasury bonds shifts to the ________.

A) right; right B) right; left C) left; left D) left; right

An rise in the liquidity of corpoprice bonds, other things being equal, shifts the demand curve for corpoprice bonds to the ________ and also the demand curve for Treasury bonds shifts to the ________.

A) right; best B) right; left C) left; left D) left; right

A(n) ________ in the liquidity of corporate bonds will certainly ________ the price of corporate bonds and ________ the yield on corpoprice bonds, all else equal.

A) increase; increase; decrease B) increase; decrease; decrease C) decrease; increase; rise D) decrease; decrease; decrease

An boost in the liquidity of corpoprice bonds will ________ the price of corporate bonds and ________ the yield of Treasury bonds, everything else hosted consistent.

A) increase; increase B) reduce; mitigate C) increase; alleviate D) reduce; boost

A decrease in the liquidity of corpoprice bonds will ________ the yield of corpoprice bonds and also ________ the yield of Treasury bonds, every little thing else hosted continuous.

A) increase; rise B) decrease; decrease C) increase; decrease D) decrease; increase

The threat premium on corporate bonds mirrors the reality that corpoprice bonds have actually a higher default danger and also are ________ U.S. Treasury bonds.

A) much less liquid than B) less speculative than C) tax-exempt unfavor D) lower-yielding than

Which of the adhering to statements is TRUE?

A) State and neighborhood governments cannot default on their bonds. B) Bonds issued by state and neighborhood governments are called municipal bonds. C) All government issued bonds—local, state, and federal—are federal income taxes exempt. D) The coupon payment on municipal bonds is commonly higher than the coupon payment on Treasury bonds.

Everything else hosted consistent, if the tax-exempt status of municipal bonds were eliminated, then

A) the interemainder prices on municipal bonds would certainly still be much less than the interest rate on Treasury bonds. B) the interest price on municipal bonds would equal the rate on Treasury bonds. C) the interest rate on municipal bonds would certainly exceed the rate on Treasury bonds. D) the interest rates on municipal, Treasury, and corporate bonds would certainly all boost.

Municipal bonds have default danger, yet their interest rates are reduced than the rates on default-complimentary Treasury bonds. This suggests that

A) the advantage from the tax-exempt standing of municipal bonds is less than their default threat. B) the benefit from the tax-exempt status of municipal bonds equals their default danger. C) the benefit from the tax-exempt status of municipal bonds exceeds their default risk. D) Treasury bonds are not default-free.

Everypoint else held consistent, a boost in marginal taxation rates would certainly likely have actually the result of ________ the demand also for municipal bonds, and ________ the demand also for UNITED STATE government bonds.

A) increasing; increasing B) increasing; decreasing C) decreasing; boosting D) decreasing; decreasing

Everything else organized continuous, a decrease in marginal taxation prices would most likely have the effect of ________ the demand for municipal bonds, and ________ the demand for U.S. government bonds.

A) increasing; raising B) increasing; decreasing C) decreasing; increasing D) decreasing; decreasing

Everypoint else organized continuous, the interest rate on municipal bonds rises loved one to the interemainder price on Treasury securities when

A) revenue taxes prices are lowered. B) revenue taxes rates are increased. C) municipal bonds become more commonly traded. D) corporate bonds end up being riskier.

Everypoint else hosted constant, if revenue taxation prices were lowered, then

A) the interemainder rate on municipal bonds would certainly autumn. B) the interest rate on Treasury bonds would climb. C) the interemainder rate on municipal bonds would rise. D) the price of Treasury bonds would certainly autumn.

Everything else hosted continuous, abolishing the individual earnings taxes will

A) rise the interest price on corporate bonds. B) minimize the interest price on municipal bonds. C) increase the interest price on municipal bonds. D) boost the interemainder rate on Treasury bonds.

Which of the adhering to statements are TRUE?

A) An increase in tax rates will increase the demand for Treasury bonds, lowering their interemainder prices. B) Because the tax-exempt standing of municipal bonds was of little advantage to bond holders once taxation rates were low, they had higher interest prices than U.S. government bonds before World War II. C) Interest rates on municipal bonds will be greater than similar bonds without the taxes exemption. D) Since coupon payments on municipal bonds are exempt from federal earnings taxation, the supposed after-taxes rerevolve on them will be better for people in reduced income taxation brackets.

The Obama management boosted the taxes on the height revenue taxes bracket from 35% to 39%. Supply and demand evaluation predicts the impact of this readjust was a ________ interemainder price on municipal bonds and a ________ interemainder rate on Treasury bonds, all else the very same.

A) higher; lower B) lower; reduced C) higher; higher D) lower; better

Three components describe the threat framework of interest rates

A) liquidity, default hazard, and also the earnings taxation therapy of a security. B) maturity, default risk, and also the revenue taxes therapy of a protection. C) maturity, liquidity, and also the revenue tax therapy of a protection. D) maturity, default risk, and also the liquidity of a protection.

The spread between the interest rates on Baa corporate bonds and U.S. federal government bonds is very huge during the Great Depression years 1930-1933. Exordinary this difference using the bond supply and demand also analysis.


Answer: Throughout the Great Depression many businesses failed. The default threat for the corporate bond increased compared to the default-free Treasury bond. The demand also for corpoprice bonds diminished while the demand also for Treasury bonds boosted resulting in a larger hazard premium.


If the federal government where to raise the income taxes rates, would this have any kind of influence on a state"s price of borrowing funds? Explain.


Answer: Yes, if the federal federal government raises income taxes prices, demand also for municipal bonds which are federal revenue tax exempt would certainly rise. This would certainly reduced the interest rate on the municipal bonds thus lowering the cost to the state of borrowing funds.


The term framework of interest rates is

A) the relationship among interemainder prices of different bonds via the exact same maturity. B) the structure of how interest prices relocate over time. C) the connection among the term to maturity of various bonds. D) the partnership among interest prices on bonds with different maturities.

A plot of the interest prices on default-cost-free federal government bonds through different terms to maturity is called

A) a risk-structure curve. B) a default-free curve. C) a yield curve. D) an interest-price curve.

Differences in ________ describe why interest prices on Treasury securities are not all the very same.

A) hazard B) liquidity C) time to maturity D) taxes attributes

The typical form for a yield curve is

A) gently upward sloping. B) mound shaped. C) level. D) bowl shaped.

When yield curves are steeply upward sloping

A) permanent interemainder prices are above momentary interemainder rates. B) momentary interest rates are over permanent interemainder prices. C) temporary interest prices are around the same as irreversible interemainder rates. D) medium-term interest prices are above both temporary and also permanent interest rates.

When yield curves are flat

A) permanent interest prices are above short-lived interemainder prices. B) temporary interemainder rates are over long-term interest rates. C) temporary interest rates are about the very same as permanent interest rates. D) medium-term interemainder rates are above both short-lived and also irreversible interemainder prices.

When yield curves are downward sloping

A) long-term interemainder rates are over short-lived interemainder rates. B) momentary interest prices are above long-term interemainder prices. C) short-term interest rates are around the exact same as long-term interest prices. D) medium-term interemainder prices are above both temporary and also long-term interemainder prices.

Economists" attempts to define the term structure of interemainder rates

A) show exactly how economic experts modify theories to improve them as soon as they are inconstant through the empirical evidence. B) illustrate how financial experts proceed to accept theories that fail to explain observed habits of interemainder price motions. C) prove that the genuine human being is a one-of-a-kind case that often tends to acquire short shrift in theoretical models. D) have actually verified completely unsatismanufacturing facility to day.

According to the expectations theory of the term framework, the interemainder rate on a permanent bond will equal the ________ of the short-term interemainder prices that people mean to take place over the life of the irreversible bond.

A) average B) sum C) difference D) multiple

If bonds through different maturities are perfect substitutes, then the ________ on these bonds should be equal.

A) supposed rerevolve B) surpclimb rerotate C) surplus rerevolve D) excess rerotate

If the expected course of one-year interest prices over the following 5 years is 4 percent, 5 percent, 7 percent, 8 percent, and also 6 percent, then the expectations theory predicts that today"s interemainder price on the five-year bond is

A) 4 percent. B) 5 percent. C) 6 percent. D) 7 percent.

If the supposed route of 1-year interest prices over the next 4 years is 5 percent, 4 percent, 2 percent, and 1 percent, then the expectations concept predicts that today"s interest rate on the four-year bond is

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

If the meant course of 1-year interemainder prices over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and also 5 percent, the expectations theory predicts that the bond with the highest possible interemainder rate this particular day is the one via a maturity of

A) two years. B) 3 years. C) four years. D) five years.

If the intended path of 1-year interest rates over the following five years is 2 percent, 4 percent, 1 percent, 4 percent, and also 3 percent, the expectations theory predicts that the bond through the lowest interemainder rate now is the one through a maturity of

A) one year. B) two years. C) three years. D) four years.

Over the next three years, the expected course of 1-year interemainder rates is 4, 1, and 1 percent. The expectations theory of the term structure predicts that the existing interest rate on 3-year bond is

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

According to the expectations theory of the term structure

A) the interest price on irreversible bonds will certainly exceed the average of momentary interemainder rates that human being mean to happen over the life of the irreversible bonds, because of their preference for short-term securities. B) interest rates on bonds of various maturities relocate together over time. C) buyers of bonds like momentary to permanent bonds. D) buyers call for a second motivation to host permanent bonds.

According to the expectations theory of the term structure

A) as soon as the yield curve is steeply upward sloping, temporary interest rates are intended to remajor reasonably secure in the future. B) once the yield curve is downward sloping, temporary interest prices are expected to remain relatively steady in the future. C) investors have actually strong choices for momentary loved one to irreversible bonds, explaining why yield curves typically slope upward. D) yield curves must be equally most likely to slope downward as slope upward.

According to the segmented markets theory of the term structure

A) bonds of one maturity are cshed substitutes for bonds of various other maturities, therefore, interest rates on bonds of different maturities move together over time. B) the interemainder price for each maturity bond is identified by supply and also demand for that maturity bond. C) investors" strong choices for short-lived relative to long-term bonds defines why yield curves typically slope downward. D) because of the positive term premium, the yield curve will certainly not be oboffered to be downward-sloping.

According to the segmented sectors concept of the term structure

A) the interest rate on irreversible bonds will certainly equal an average of short-lived interest prices that world expect to occur over the life of the permanent bonds. B) buyers of bonds execute not favor bonds of one maturity over one more. C) interest rates on bonds of various maturities perform not move together over time. D) buyers need a secondary motivation to hold long-term bonds.

A vital assumption in the segmented sectors concept is that bonds of various maturities

A) are not substitutes at all. B) are perfect substitutes. C) are substitutes just if the investor is offered a premium impetus. D) are substitutes yet not perfect substitutes.

The segmented markets theory can explain

A) why yield curves typically tend to slope upward. B) why interest prices on bonds of various maturities tend to move together. C) why yield curves tend to slope upward once momentary interest prices are low and also to be inverted when temporary interest prices are high. D) why yield curves have been offered to forecast service cycles.

According to the liquidity premium theory of the term structure

A) because buyers of bonds may choose bonds of one maturity over one more, interemainder prices on bonds of various maturities carry out not relocate together over time. B) the interest price on irreversible bonds will certainly equal an average of momentary interemainder prices that world mean to happen over the life of the irreversible bonds plus a term premium. C) because of the positive term premium, the yield curve will certainly not be oboffered to be downward sloping. D) the interest rate for each maturity bond is established by supply and demand for that maturity bond.

According to the liquidity premium concept of the term structure

A) bonds of different maturities are not substitutes. B) if yield curves are downward sloping, then short-lived interemainder prices are intended to fall by so a lot that, also when the positive term premium is added, irreversible rates autumn below short-term prices. C) yield curves need to never slope downward. D) interemainder prices on bonds of different maturities perform not relocate together over time.

The extra catalyst that the purchaser of a Treasury protection requires to buy a long-term protection fairly than a short-lived protection is called the

A) hazard premium. B) term premium. C) tax premium. D) industry premium.

If 1-year interemainder prices for the next 3 years are supposed to be 1, 1, and also 1 percent, and also the 3-year term premium is 1 percent, than the 3-year bond price will be

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

If 1-year interemainder rates for the next five years are expected to be 4, 2, 5, 4, and also 5 percent, and also the 5-year term premium is 1 percent, than the 5-year bond price will certainly be

A) 2 percent. B) 3 percent. C) 4 percent. D) 5 percent.

According to the liquidity premium concept of the term structure, a steeply upward sloping yield curve indicates that momentary interemainder prices are expected to

A) increase later. B) remajor unreadjusted in the future. C) decrease moderately later. D) decline sharply in the future.

According to the liquidity premium concept of the term structure, a slightly upward sloping yield curve indicates that short-term interest rates are meant to

A) increase later on. B) remain unchanged in the future. C) decline moderately in the future. D) decline sharply in the future.

According to the liquidity premium concept of the term structure, a flat yield curve indicates that short-lived interemainder prices are expected to

A) climb later on. B) remain unreadjusted later on. C) decrease moderately in the future. D) decline sharply in the future.

According to the liquidity premium theory of the term structure, a downward sloping yield curve shows that temporary interemainder prices are intended to

A) climb later on. B) remain unreadjusted in the future. C) decline moderately later. D) decline sharply later.

According to the liquidity premium theory, a yield curve that is flat suggests that

A) bond purchasers expect interest prices to rise later. B) bond purchasers expect interemainder prices to continue to be the same. C) bond purchasers mean interemainder prices to loss later. D) the yield curve has actually nothing to do via expectations of bond purchasers.

If the yield curve is level for brief maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild choice for shorter-term bonds) indicates that the sector is predicting

A) a increase in temporary interest prices in the close to future and also a decrease additionally out in the future. B) constant momentary interemainder prices in the near future and also a decline even more out later. C) a decrease in short-lived interest rates in the near future and a rise additionally out later on. D) a decline in short-term interest prices in the close to future and an also steeper decline better out in the future.

If the yield curve slope is level for short maturities and also then slopes steeply upward for longer maturities, the liquidity premium concept (assuming a mild preference for shorter-term bonds) shows that the sector is predicting

A) a climb in short-term interest prices in the near future and a decrease further out later. B) continuous short-term interest rates in the close to future and further out later on. C) a decline in short-term interest prices in the close to future and also a climb further out in the future. D) consistent short-term interemainder prices in the near future and a decline better out in the future.

If the yield curve has a mild upward slope, the liquidity premium theory (assuming a mild choice for shorter-term bonds) indicates that the industry is predicting

A) a rise in short-term interemainder prices in the near future and also a decrease additionally out later. B) continuous short-lived interemainder rates in the close to future and also further out in the future. C) a decrease in short-term interemainder rates in the close to future and also a rise additionally out later. D) a decrease in momentary interest prices in the near future and an even steeper decrease better out in the future.

The wanted habitat theory of the term framework is closely related to the

A) expectations theory of the term structure. B) segmented industries concept of the term framework. C) liquidity premium concept of the term framework. D) the inverted yield curve theory of the term structure.

The expectations theory and the segmented markets concept do not describe the facts exceptionally well, yet they administer the groundoccupational for the many widely accepted concept of the term framework of interest rates

A) the Keynesian concept. B) the separable markets concept. C) the liquidity premium concept. D) the asset sector strategy.

The ________ of the term structure of interemainder rates states that the interemainder price on a permanent bond will equal the average of short-term interest prices that people suppose to take place over the life of the long-term bond, and investors have actually no preference for momentary bonds relative to irreversible bonds.

A) segmented sectors theory B) expectations concept C) liquidity premium concept D) separable industries concept

According to this concept of the term framework, bonds of different maturities are not substitutes for one an additional.

A) segmented markets concept B) expectations concept C) liquidity premium theory D) separable sectors theory

In actual exercise, momentary interest rates and permanent interemainder rates typically relocate together; this is the major shortresulting the

A) segmented sectors concept. B) expectations theory. C) liquidity premium concept. D) separable markets concept.

The ________ of the term framework claims the following: the interest price on a long-term bond will certainly equal an average of short-lived interest rates supposed to happen over the life of the irreversible bond plus a term premium that responds to supply and demand also problems for that bond.

A) segmented sectors concept B) expectations concept C) liquidity premium concept D) separable industries theory

A specifically attrenergetic function of the ________ is that it tells you what the sector is predicting about future short-lived interest rates by just looking at the slope of the yield curve.

A) segmented markets concept B) expectations concept C) liquidity premium theory D) separable markets theory
*

The steeply upward sloping yield curve in the figure over shows that

A) short-term interest rates are expected to increase later. B) short-lived interest prices are expected to fall moderately later. C) momentary interemainder rates are intended to fall sharply later. D) short-term interest rates are supposed to remajor unreadjusted in the future.
*

The steeply upward sloping yield curve in the number above shows that ________ interest prices are intended to ________ later.

A) short-term; climb B) short-term; loss moderately C) short-term; remain unreadjusted D) long-term; autumn moderately
*

The U-shaped yield curve in the figure over shows that temporary interemainder prices are supposed to

A) climb in the near-term and also autumn later. B) fall sharply in the near-term and increase later. C) autumn moderately in the near-term and rise in the future. D) remain unadjusted in the near-term and also increase later.
*

The U-shaped yield curve in the figure above indicates that the inflation rate is expected to

A) remain continuous in the near-term and loss later on. B) loss sharply in the near-term and increase in the future. C) rise moderately in the near-term and also fall in the future. D) remain continuous in the near-term and also rise in the future.
*

The mound-shaped yield curve in the figure over indicates that temporary interemainder prices are expected to

A) climb in the near-term and also loss in the future. B) autumn moderately in the near-term and also increase later on. C) autumn sharply in the near-term and also increase later on. D) remajor unadjusted in the near-term and loss in the future.
*

The mound-shaped yield curve in the figure above indicates that the inflation price is meant to

A) remajor consistent in the near-term and also autumn later. B) autumn moderately in the near-term and also increase later on. C) rise moderately in the near-term and also fall later. D) remajor unadjusted in the near-term and also rise later.

An inverted yield curve predicts that short-term interest rates

A) are meant to rise in the future. B) will climb and then fall later on. C) will remajor unreadjusted later on. D) will loss later.

When temporary interemainder rates are supposed to fall sharply in the future, the yield curve will

A) slope up. B) be level. C) be inverted. D) be an inverted U shape.

If investors expect interemainder rates to loss significantly later, the yield curve will certainly be inverted. This suggests that the yield curve has a ________ slope.

A) steep upward B) slight upward C) flat D) downward

When the yield curve is level or downward-sloping, it indicate that the economic situation is more likely to enter

A) a recession. B) an growth. C) a boom time. D) a duration of enhancing output.

A ________ yield curve predicts a future boost in inflation.

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A) steeply upward sloping B) slight upward sloping C) level D) downward sloping

If a higher inflation is supposed, what would you expect to occur to the shape of the yield curve? Why?


Answer: The yield curve have to have actually a steep upward slope. Nominal interemainder rates will increase if the inflation price boosts, therefore, bond purchasers will require a higher term premium to organize the riskier irreversible bond.