Exam 3: Structure of Interest Rates

In some time periods, there is evidence that corporations initially financed long-term projects with short-term funds. They planned to borrow long-term funds once interest rates were lower. This specifically supports the ____ for explaining the term structure of interest rates.

(Multiple Choice)

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Question 21

According to segmented markets theory, if investors have mostly short-term funds available and borrowers want long-term funds, there would be pressure on the supply of short-term funds provided by investors and pressure on the yield of long-term securities.

(Multiple Choice)

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Question 22

According to segmented markets theory, if investors have mostly long-term funds available and borrowers want short-term funds, this will place pressure on the demand for long-term funds issued by borrowers and the yield curve will be sloping.

(Multiple Choice)

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Question 23

If the liquidity premium theory completely describes the term structure of interest rates, then, on the average, the yield curve should be

(Multiple Choice)

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Question 24

If shorter-term securities have higher annualized yields than longer-term securities, the yield curve

(Multiple Choice)

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Question 25

Within the category of capital market securities, municipal bonds have the before-tax yield, and their after-tax yield is typically of Treasury bonds from the perspective of investors in high tax brackets.

(Multiple Choice)

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Question 26

Which of the following is NOT a characteristic affecting the yields on debt securities?

(Multiple Choice)

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Question 27

Assume that the Treasury bond yield today is 2 percentage points higher than it was one year ago. Also assume that the credit (default)risk premium of an A-rated bond declined by 0.4 percentage point since one year ago. A newly issued A-rated bond will likely offer a yield today that is ____ the yield that was offered on an A-rated bond issued one year ago.

(Multiple Choice)

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Question 28

Some financial institutions such as commercial banks typically invest only in

(Multiple Choice)

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Question 29

Other things being equal, an expected decrease in interest rates will increase the demand for long-term funds by borrowers.

(True/False)

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Question 30

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. What is the one-year forward rate two years from now?

(Multiple Choice)

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Question 31

Other things being equal, the yield required on A-rated bonds should be ____ the yield required on B-rated bonds whose other characteristics are exactly the same.

(Multiple Choice)

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Question 32

If a security can easily be converted to cash without a loss in value, it

(Multiple Choice)

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Question 33

Credit (default)risk is likely to be highest for

(Multiple Choice)

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Question 34

Based on the expectations theory of the term structure of interest rates, a flat or inverted yield curve is most commonly interpreted to signal that that the economy will strengthen in the near future.

(True/False)

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Question 35

Investors may attempt to benefit from the higher yields on longer-term securities even though they have only short-term funds to invest by using a strategy called ________ the yield curve.

(Multiple Choice)

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Question 36

Some types of debt securities always offer a higher yield than others.

(True/False)

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Question 37

A theory states that while investors and borrowers may normally concentrate on a particular natural maturity market, conditions may cause them to change maturity markets. This theory is called the

(Multiple Choice)

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Question 38

The graphic comparison of maturities and annualized yields is known as the interest rate curve.

(True/False)

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Question 39

If all other characteristics are similar, would have to offer .

(Multiple Choice)

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Question 40

Showing 21 - 40 of 80

Exam 3: Structure of Interest Rates

In some time periods, there is evidence that corporations initially financed long-term projects with short-term funds. They planned to borrow long-term funds once interest rates were lower. This specifically supports the ____ for explaining the term structure of interest rates.

According to segmented markets theory, if investors have mostly short-term funds available and borrowers want long-term funds, there would be ____ pressure on the supply of short-term funds provided by investors and ____ pressure on the yield of long-term securities.

According to segmented markets theory, if investors have mostly long-term funds available and borrowers want short-term funds, this will place ____ pressure on the demand for long-term funds issued by borrowers and the yield curve will be ____ sloping.

If the liquidity premium theory completely describes the term structure of interest rates, then, on the average, the yield curve should be

If shorter-term securities have higher annualized yields than longer-term securities, the yield curve

Within the category of capital market securities, municipal bonds have the before-tax yield, and their after-tax yield is typically of Treasury bonds from the perspective of investors in high tax brackets.

Which of the following is NOT a characteristic affecting the yields on debt securities?

Some financial institutions such as commercial banks typically invest only in

Other things being equal, an expected decrease in interest rates will increase the demand for long-term funds by borrowers.

Assume that today, the annualized two-year interest rate is 12 percent, and the one-year interest rate is 9 percent. A three-year security has an annualized interest rate of 14 percent. What is the one-year forward rate two years from now?

Other things being equal, the yield required on A-rated bonds should be ____ the yield required on B-rated bonds whose other characteristics are exactly the same.

If a security can easily be converted to cash without a loss in value, it

Credit (default)risk is likely to be highest for

Based on the expectations theory of the term structure of interest rates, a flat or inverted yield curve is most commonly interpreted to signal that that the economy will strengthen in the near future.

Investors may attempt to benefit from the higher yields on longer-term securities even though they have only short-term funds to invest by using a strategy called ________ the yield curve.

Some types of debt securities always offer a higher yield than others.

A theory states that while investors and borrowers may normally concentrate on a particular natural maturity market, conditions may cause them to change maturity markets. This theory is called the

The graphic comparison of maturities and annualized yields is known as the interest rate curve.

If all other characteristics are similar, ____ would have to offer ____.

Role of Financial Markets and Institutions

Determination of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

Filters

According to segmented markets theory, if investors have mostly short-term funds available and borrowers want long-term funds, there would be pressure on the supply of short-term funds provided by investors and pressure on the yield of long-term securities.

According to segmented markets theory, if investors have mostly long-term funds available and borrowers want short-term funds, this will place pressure on the demand for long-term funds issued by borrowers and the yield curve will be sloping.

If all other characteristics are similar, would have to offer .