Exam 6: The Risk and Term Structure of Interest Rates

The preferred habitat theory of the term structure is closely related to the

Bonds with relatively high risk of default are called

Use the following figure to answer the question : -The U-shaped yield curve in the figure above indicates that short-term interest rates are expected to

Which of the following statements are TRUE?

Three factors explain the risk structure of interest rates

When yield curves are steeply upward sloping

Use the following figure to answer the question : -The mound-shaped yield curve in the figure above indicates that the inflation rate is expected to

Everything else held constant,if the tax-exempt status of municipal bonds were eliminated,then

According to the liquidity premium theory of the term structure,a slightly upward sloping yield curve indicates that short-term interest rates are expected to

The collapse of the subprime mortgage market increased the spread between Baa and default-free U.S. Treasury bonds. This is due to

Which of the following securities has the lowest interest rate?

When the Treasury bond market becomes less liquid,other things equal,the demand curve for corporate bonds shifts to the ________ and the demand curve for Treasury bonds shifts to the ________.

The risk premium on corporate bonds reflects the fact that corporate bonds have a higher default risk and are ________ U.S. Treasury bonds.

If a higher inflation is expected,what would you expect to happen to the shape of the yield curve? Why?

A decrease in the liquidity of corporate bonds,other things being equal,shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds shifts to the ________.

A decrease in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the price of Treasury bonds,everything else held constant.

A plot of the interest rates on default-free government bonds with different terms to maturity is called

A(n)________ in the liquidity of corporate bonds will ________ the price of corporate bonds and ________ the yield on corporate bonds,all else equal.

The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond,and investors have no preference for short-term bonds relative to long-term bonds.

Differences in ________ explain why interest rates on Treasury securities are not all the same.