Exam 7: Effects of Inflation and Yield Curves on Stock Prices and Investments

According to recent research, the Fisher effect is stable over time.

The unbiased expectations hypothesis states that any two investment strategies that are available in the market and that involve assets which differ only by their terms to maturity, should yield the same holding period return for the investor.

The term convexity,

The expectations hypothesis asserts that investors derive their expectations about future interest rates on the basis of historical experience.

If an upward-sloping yield curve starts to steepen, portfolio managers should try to shorten the maturity of their liabilities.

The relationship between an asset's change in market price and its change in yield or interest rate is called its

The liquidity premium will be positive on the following assets

In 1997, the U.S. was the first government to issue inflation-indexed bonds, known as TIPS.

When the risk that interest-rate changes will affect the total dollar return from a security portfolio is reduced to zero, this is referred to as:

Some researchers argue that because corporate contracts and balance sheets are in nominal terms, rising inflation reduces corporate profitability, causing stock prices to fall.

Securities with a higher duration value have lower price risk.

According to your text, a practical use of the yield curve employed frequently by dealers in United States Government securities is:

The ____ theory states that investors choose a particular maturity based on the type of business they are in.

The duration of a zero-coupon bond is equal the length of time between its purchase and its maturity.

Recent research observes that yield curves in major industrialized countries tend to change over time in roughly the same way.

Portfolio immunization using duration seems to work well because the largest single element seen in most interest-rate movements is a parallel change in all interest rates.

Accelerating inflation appears to be associated with a yield curve increasingly positive in slope, according to the results of recent research.

Default risk is held constant when drawing a yield curve.

Some researchers argue that because corporate contracts and balance sheets are in nominal terms, rising inflation reduces corporate profitability, causing stock prices to rise.

The expectations hypothesis assumes that investors act as risk minimizers over their planned holding period.