Exam 6: The Risk and Term Structure of Interest Rates

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

Everything else held constant,if income tax rates were lowered,then

The typical shape for a yield curve is

If the probability of a bond default increases because corporations begin to suffer large losses,then the default risk on corporate bonds will ________ and the expected return on these bonds will ________,everything else held constant.

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

As default risk decreases,the expected return on corporate bonds ________,and the return becomes ________ uncertain,everything else held constant.

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

-The U-shaped yield curve in the figure above indicates that short-term interest rates are expected to

-The steeply upward sloping yield curve in the figure above indicates that

If the federal government where to raise the income tax rates,would this have any impact on a state's cost of borrowing funds? Explain.

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

The segmented markets theory can explain

Which of the following statements are TRUE?

As default risk increases,the expected return on corporate bonds ________,and the return becomes ________ uncertain,everything else held constant.