Exam 6: The Structure of Interest Rates

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With reference to the data above, what is the expected real rate of return on the 2-year Treasury security?

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The yield curve is a plot of

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Applying the expectations theory, a bank depositor chooses between purchasing a one- year CD paying 5 percent and a two-year CD paying 5.5 percent. If indifferent between the two, the depositor must expect one-year CDs one year from now to have a rate of

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The yield curves show the relationship between interest rates on bonds similar in terms except for maturity.

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The term structure of interest rates

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The liquidity premium theory of the term structure of interest rates is best supported by what type of yield curve?

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A downward sloping yield curve is typically seen just before an economic expansion.

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Contingent Convertible bonds (CoCos) are NOT similar to ordinary convertible bonds because:

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Bonds rated BBB would have lower yields than AAA-rated bonds, and higher prices, everything else the same.

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Bond A is not callable; bond B is callable. Investors will require a higher yield on bond __ and will pay ____ for the bond.

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A convertible bond will generally have a higher market yield relative to similar nonconvertible bonds.

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With reference to the data above, what is the default risk premium on commercial paper?

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Explain (a.) liquidity problem in bond market, (b.) default risk, and (c.) maturity risk premiums.

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Which of the following is not considered when assigning a bond rating?

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With reference to the data above, what is the expected after-tax real rate of return on the one-year Treasury Bill for an investor in the 33 percent marginal tax bracket?

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Which of the following statements about bonds is NOT true?

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Which of the following statements is true?

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The call price of a bond is usually below the bond's par value.

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The source of data for a yield curve might be

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According to the expectations theory, if the market believes that interest rates are likely to decrease in the near future,

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