Exam 6: The Risk and Term Structure of Interest Rates

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

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

A decrease in default risk on corporate bonds ________ the demand for these bonds,and ________ the demand for default-free bonds,everything else held constant.

The risk that interest payments will not be made,or that the face value of a bond is not repaid when a bond matures is

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 ________.

If 1-year interest rates for the next three years are expected to be 1,1,and 1 percent,and the 3-year term premium is 1 percent,than the 3-year bond rate will be

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

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

The segmented markets theory can explain

Bonds with relatively low risk of default are called ________ securities and have a rating of Baa (or BBB)and above;bonds with ratings below Baa (or BBB)have a higher default risk and are called ________.

The risk structure of interest rates is

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

According to the expectations theory of the term structure,the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond.

According to the expectations theory of the term structure