Exam 6: The Economics of Interest-Rate Spreads and Yield Curves

An increase in household wealth increases the risk premium of corporate bonds.

If a positive liquidity premium is included in the formula for the term structure, a downward sloping yield curve is impossible.

Ceteris paribus, an increase in the government budget deficit will cause the risk premia on corporate bonds to

If the government makes it easier to buy its bonds online, the risk premia for corporate bonds will

Ratings from Moody's and S&P measure

If S&P upgrades a corporate bond the _____ for the bond will shift and its risk premium will

Ceteris paribus, a junk bond has a lower risk premium than other bonds.

If interest rates on one-year bonds are expected to stay at 3% and the term premium is 1%, what would the yield curve look like?

Does the information in the table about the yield curve indicate a possible recession?

If a corporate bond loses its listing on a centralized exchange, explain the effect on the risk premium in terms of the supply and demand for bonds.