Exam 6: The Structure of Interest Rates
Exam 1: An Overview of Financial Markets and Institutions119 Questions
Exam 2: The Federal Reserve and Its Powers83 Questions
Exam 3: The Fed and Interest Rates81 Questions
Exam 4: The Level of Interest Rates80 Questions
Exam 5: Bond Prices and Interest Rate Risk86 Questions
Exam 6: The Structure of Interest Rates92 Questions
Exam 7: Money Markets82 Questions
Exam 8: Bond Markets71 Questions
Exam 9: Mortgage Markets90 Questions
Exam 10: Equity Markets86 Questions
Exam 11: Derivatives Markets78 Questions
Exam 12: International Markets81 Questions
Exam 13: Commercial Bank Operations84 Questions
Exam 14: International Banking86 Questions
Exam 15: Regulation of Financial Institutions82 Questions
Exam 16: Thrift Institutions and Finance Companies87 Questions
Exam 17: Insurance Companies and Pension Funds81 Questions
Exam 18: Investment Banking70 Questions
Exam 19: Investment Companies87 Questions
Exam 20: Risk Management in Financial Institutions58 Questions
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With reference to the data above, what is the default risk premium on 3-year AA-rated corporate bonds?
(Multiple Choice)
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According to the expectations theory, if the market believes that interest rates are likely to increase in the near future, it would lead to
(Multiple Choice)
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If interest rates are expected to increase in the future, one would expect to see an upward sloping yield curve.
(True/False)
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According to the preferred habitat theory, investors may change their preferred maturity in response to expected yield premiums.
(True/False)
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A put option sets a "floor" or minimum price of a bond at the exercise price, which is generally at or above par value.
(True/False)
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Which of the following statements about callable bonds is not true?
(Multiple Choice)
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With reference to the data above, the implied one-year forward rate (expected one-year rate one year from now) on Treasuries is
(Multiple Choice)
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The preferred habitat theory explains the existence of discontinuities in the yields curve.
(True/False)
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A one-year interest rate is 5.50% and a one-year forward rate two years from now is 6.0%. According to the expectations theory, what is the current two-year rate?
(Multiple Choice)
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Ceteris paribus, the required interest rate of a callable bond will be higher than the interest rate on a convertible bond.
(True/False)
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What actions by bond investors, given their expectations of increasing interest rates, result in an upward sloping yield curve?
(Multiple Choice)
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An investor in the 33 percent tax bracket will buy a 6 percent municipal bond rather than a similarly rated 8.5 percent corporate bond.
(True/False)
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