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

Default risk is measured by the

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

A two-year bond is a perfect substitute for two consecutive one-year bonds.

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

If S&P upgrades a corporate bond its yield will _____ and its risk premium will

, a junk bond has a higher yield and higher risk premium than other bonds.

The yield on a one-year bond is currently 3% and the expected yield for the next three years is also 3%. If the term premium is 0.5, then the yield curve

The U.S. Federal government has never defaulted on its bonds.

Which of the following factors could explain difference in yields on bonds with the same time to maturity?

You cannot post-dict the changes in rank order between different types of bonds.

If yields on one-year bonds are expected to rise and the liquidity premium is zero, the yield curve will be

Interest rate risk is measured by the

If a company gets concessions from labor in union negotiations, one would expect a(n) _____ in yields on its bonds due to an increase in

Positive spreads (long term rates - short term rates) indicate a possible future recession.

Explain the liquidity preference and its impact on the yield curve.

Which of the following factors could explain difference in yields on bonds with the same time to maturity?

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.

No government agency has ever defaulted on its bonds in the United States.

The yield on a one-year bond is currently 5% and the liquidity premium is 0.5( is the years to maturity. You are told that the spread between two- and one-year bonds is positive. What does that tell you about the yield on the two-year bond?

A change in the profit opportunities of a company affects the risk premium of that company's bonds.