Exam 7: Risk Structure and Term Structure of Interest Rates

The greatest appeal of U.S. Treasury securities is that

Which of the following is true of the segmented markets theory?

What is the most important contrast between the segmented markets theory and the expectations theory?

Suppose that information costs fall with respect to medium-quality corporate bonds. The result will be that the prices of medium-quality corporate bonds will

Investors often pay professional analysts to gather and monitor information on the creditworthiness of borrowers because

The flight to quality during the early years of the Great Depression resulted in

Under the preferred habitat theory the shape of the yield curve depends on

Unlike the segmented markets theory, the expectations theory attributes the slope of the yield curve to

Under the preferred habitat theory, a flat yield curve indicates that investors expect future short-term rates to

Interest and capital gains are taxed differently in the United States in that

The segmented markets theory

Default risk arises from the fact that

Suppose the private bond rating agencies ceased to exist. What would be the impact on the bond market?

If lenders anticipate no changes in liquidity, information costs, and tax differences, the yield on a risky security should be

Because savers are generally risk-averse

If the preferred habitat theory is correct, a reduction by the Treasury in the supply of 30-year bonds should

Differences in the taxation of returns

When a company whose ability to repay its obligations in full is uncertain borrows funds

Discuss what happened to the market prices on corporate securities relative to government securities during the years 1929-1931.

Which of the following is the highest bond rating assigned by Moody's Investors Service?