Exam 13: An Introduction to Interest Rate Determination and Forecasting

The risk structure of interest rates describes the relationship between interest rates of different bonds with the same maturity.

Using the expectations theory of term structure,a negatively sloped yield curve indicates that investors expect:

According to the loanable funds approach to interest rate determination,the supply curve slopes up because:

The term structure of interest rates is generally defined with respect to yields on which securities?

If there is an excess demand for loanable funds at a given interest rate:

The segmented markets theory of term structure:

Support for the addition of a liquidity premium to the expectations theory is derived from:

A yield curve where the market participants expect higher future rates of interest is:

Which of the following determine(s)the level of interest rates? i.The supply of savings by households and businesses ii.The demand for investment funds iii.The government's net supply of and/or demand for funds

Unfortunately,economic indicators don't provide clear and unambiguous messages about the future direction of economic activity and growth.

According to the expectations theory of term structure,if next year's short-term interest rate is expected to be lower than the current short-term rate,the:

What is the most important contrast between the expectations theory and the segmented markets theory?

All else being equal,if a central bank sells government bonds from the market it would:

If the yields on short-term securities are lower than comparable long-term securities,the yield curve will be:

In the loanable funds approach to interest rate determination,if the business sector _____ its demand for funds,then the demand curve would shift to the _____:

Unsecured notes are generally:

The expression 'term structure of interest rates':

The liquidity premium theory of the term structure assumes:

A decrease in the prices of goods and services causes the demand for funds to _____ and market interest rates should _______.

Using the pure expectations approach to the determination of interest rates,calculate the expected (E)rate of interest of a one-year investment that will be available in 12 months' time (₁i₁),given the following data: Current rate of return on a one-year-to-maturity (₀i₁)instrument:7.75% per annum Current rate of return on a two-year maturity (₀i₂)instrument:8.25% per annum