A) the framework of exactly how interest rates relocate over time. B) the relationship amongst interest rates of different bonds with the very same maturity. C) the relationship among the term to maturity of various bonds. D) the relationship amongst interest rates on binding with different maturities.

The threat that attention payments will certainly not it is in made, or that the face value the a bond is not repaid when a bond matures is

A) interest price risk. B) inflation risk. C) liquidity risk. D) default risk.

Bonds v no default risk space called

A) flower bonds. B) no-risk bonds. C) default-free bonds. D) zero-risk bonds.

Which that the complying with bonds are taken into consideration to be default-risk free?

A) municipal bonds B) investment-grade bonds C) U.S. Treasury bonds D) junk binding

U.S. Federal government bonds have actually no default hazard because

A) they room issued in strictly restricted quantities. B) the federal federal government can increase taxes or print money to salary its obligations. C) they room backed v gold reserves. D) they can be exchanged for silver at any time.

The spread in between the interest prices on bonds v default risk and also default-free bonds is referred to as the

A) risk premium. B) junk margin. C) bond margin. D) default premium.

If the probability the a bond default increases due to the fact that corporations start to suffer large losses, climate the default risk on this firm bonds will ________ and the supposed return on these bonds will ________, everything else organized constant.

You are watching: According to the expectations theory of the term structure

A) decrease; increase B) decrease; decrease C) increase; increase D) increase; diminish

A bond with default danger will always have a ________ danger premium and an increase in its default danger will ________ the hazard premium.

A) positive; advanced B) positive; reduced C) negative; raise D) negative; lower

If a corporation begins to suffer large losses, climate the default threat on the corporate bond will

A) increase and also the bond"s return will become an ext uncertain, an interpretation the meant return top top the corporate bond will certainly fall. B) increase and the bond"s return will come to be less uncertain, meaning the supposed return top top the that company bond will fall. C) decrease and also the bond"s return will become less uncertain, definition the intended return on the this firm bond will fall. D) decrease and also the bond"s return will become less uncertain, definition the expected return ~ above the corporate bond will rise.

If the possibility of a default increases due to the fact that corporations begin to suffer losses, then the default hazard on corporate bonds will certainly ________, and also the bonds" return will become ________ uncertain, definition that the supposed return on this bonds will certainly decrease, whatever else held constant.

A) increase; much less B) increase; much more C) decrease; much less D) decrease; more

Other points being equal, boost in the default risk of that company bonds move the demand curve because that corporate bonds to the ________ and the need curve because that Treasury bonds come the ________.

A) right; appropriate B) right; left C) left; ideal D) left; left

Other points being equal, a to decrease in the default hazard of this firm bonds move the demand curve because that corporate bonds to the ________ and the demand curve for Treasury bonds come the ________.

A) right; right B) right; left C) left; ideal D) left; left

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

A) increase; increase; boost B) increase; decrease; boost C) decrease; increase; boost D) decrease; decrease;decrease

An increase in the riskiness of corporate bonds will ________ the price of this firm bonds and ________ the price of Treasury bonds, every little thing else hosted constant.

A) increase; rise B) reduce; alleviate C) reduce; rise D) increase; reduce

A to decrease in the riskiness of that company bonds will certainly ________ the price of corporate bonds and ________ the price that Treasury bonds, everything else hosted constant.

A) increase; increase B) reduce; minimize C) reduce; rise D) increase; reduce

An rise in the riskiness of that company bonds will ________ the yield on this firm bonds and also ________ the productivity on Treasury securities, whatever else hosted constant.

A) increase; increase B) reduce; alleviate C) increase; minimize D) reduce; rise

A to decrease in the riskiness of that company bonds will ________ the productivity on corporate bonds and ________ the yield on Treasury securities, everything else organized constant.

A) increase; boost B) decrease; decrease C) increase; to decrease D) decrease; rise

An rise in default danger on corporate bond ________ the demand for these bonds, but ________ the demand for default-free bonds, every little thing else hosted constant.

A) increases; lowers B) lowers; boosts C) does no change; significantly increases D) middle lowers; go not change

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

A) increases; lowers B) lowers; boosts C) does not change; substantially increases D) center lowers; go not readjust

As default threat increases, the intended return on corporate bonds ________, and also the return i do not care ________ uncertain, whatever else organized constant.

A) increases; much less B) increases; an ext C) decreases; less D) decreases; much more

As default hazard decreases, the intended return ~ above corporate binding ________, and the return i do not care ________ uncertain, whatever else hosted constant.

A) increases; less B) increases; an ext C) decreases; much less D) decreases; more

As their family member riskiness ________, the meant return ~ above corporate bonds ________ family member to the supposed return on default-free bonds, every little thing else organized constant.

A) increases; rises B) increases; reduce C) decreases; decreases D) decreases; walk not readjust

Which that the adhering to statements space TRUE?

A) A diminish in default threat on corporate bonds lowers the demand for this bonds, but increases the need for default-free bonds. B) The supposed return on corporate binding decreases as default threat increases. C) A this firm bond"s return becomes less uncertain as default hazard increases. D) together their loved one riskiness increases, the intended return on that company bonds rises relative to the meant return ~ above default-free bonds.

Everything else held constant, if the federal federal government were come guarantee now that it will certainly pay creditor if a corporation go bankrupt in the future, the interest rate on corporate bonds will ________ and the interest rate on Treasury securities will certainly ________.

A) increase; rise B) increase; diminish C) decrease; boost D) decrease; decrease

Bonds with relatively high risk of default are called

A) Brady bonds. B) junk bonds. C) zero coupon bonds. D) invest grade bonds.

Junk bonds, bonds with a short bond rating, are additionally known as

A) high-yield bonds. B) invest grade bonds. C) high top quality bonds. D) zero-coupon bonds.

Bonds with reasonably low danger of default are called ________ securities and also have a rating of Baa (or BBB) and also above; bonds with ratings below Baa (or BBB) have a greater default risk and also are dubbed ________.

A) invest grade; lower grade B) investment grade; junk bond C) high quality; lower grade D) high quality; junk binding

Which the the complying with bonds would have the highest default risk?

A) municipal binding B) investment-grade bonds C) U.S. Treasury bond D) junk bond

Which the the adhering to long-term bonds has the greatest interest rate?

A) corporate Baa bond B) U.S. Treasury bonds C) this firm Aaa binding D) municipal bond

Which the the following securities has actually the lowest attention rate?

A) junk bonds B) U.S. Treasury binding C) investment-grade binding D) that company Baa binding

The spread in between interest prices on low quality corporate bonds and also U.S. Federal government bonds

A) widened considerably during the an excellent Depression. B) narrowed significantly during the good Depression. C) narrowed moderately during the good Depression. D) walk not change during the an excellent Depression.

During the good Depression years 1930-1933 there was a really high price of business failures and defaults, us would intend the danger premium because that ________ bonds come be really high.

A) U.S. Treasury B) this firm Aaa C) municipal D) this firm Baa

Risk premiums on corporate bonds have tendency to ________ during organization cycle expansions and also ________ throughout recessions, every little thing else organized constant.

A) increase; boost B) increase; to decrease C) decrease; rise D) decrease; decrease

The please of the subprime mortgage market

A) did not influence the corporate shortcut market. B) increased the viewed riskiness the Treasury securities. C) decreased the Baa-Aaa spread. D) enhanced the Baa-Aaa spread.

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

A) a reduction in risk. B) a palliation in maturity. C) a flight to quality. D) a trip to liquidity.

During a "flight to quality"

A) the spread between Treasury bonds and also Baa bond increases. B) the spread in between Treasury bonds and also Baa binding decreases. C) the spread in between Treasury bonds and Baa binding is no affected. D) the readjust in the spread between Treasury bonds and also Baa bonds can not be predicted.

If you have actually a an extremely low yongin for risk, i m sorry of the adhering to bonds would certainly you be least likely to host in her portfolio?

A) a U.S. Treasury link B) a municipal shortcut C) a that company bond with a rating that Aaa D) a corporate bond v a rating the Baa

Which the the adhering to statements is TRUE?

A) A liquid asset is one that have the right to be quickly and cheaply converted into cash. B) The need for a bond decreases when the becomes less liquid, decreasing the interest rate spread in between it and also relatively an ext liquid bonds. C) The differences in link interest rates reflect differences in default danger only. D) The this firm bond industry is the many liquid link market.

Corporate bonds space not as liquid as federal government bonds because

A) fewer corporate binding for any one corporation space traded, do them much more costly come sell. B) the corporate link rating must be calculated each time they are traded. C) that company bonds room not callable. D) that company bonds can not be resold.

When the Treasury bond sector becomes much more liquid, various other things equal, the demand curve because that corporate bonds shifts to the ________ and also the demand curve because that Treasury bonds shifts to the ________.

A) right; best B) right; left C) left; ideal D) left; left

When the Treasury bond market becomes less liquid, various other things equal, the need curve because that corporate bonds shifts to the ________ and the demand curve because that Treasury bonds move to the ________.

A) right; right B) right; left C) left; best D) left; left

A decrease in the liquidity of that company bonds, various other things gift equal, move the need curve for corporate bonds to the ________ and also the demand curve because that Treasury bonds shifts to the ________.

A) right; best B) right; left C) left; left D) left; appropriate

An rise in the liquidity of this firm bonds, various other things being equal, move the demand curve for corporate bonds come the ________ and also the demand curve for Treasury bonds move to the ________.

A) right; best B) right; left C) left; left D) left; appropriate

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

A) increase; increase; decrease B) increase; decrease; diminish C) decrease; increase; increase D) decrease; decrease; to decrease

An rise in the liquidity of that company bonds will certainly ________ the price of corporate bonds and also ________ the productivity of Treasury bonds, everything else hosted constant.

A) increase; boost B) reduce; mitigate C) increase; reduce D) reduce; boost

A diminish in the liquidity of that company bonds will ________ the yield of this firm bonds and also ________ the productivity of Treasury bonds, every little thing else hosted constant.

A) increase; rise B) decrease; diminish C) increase; diminish D) decrease; increase

The threat premium on corporate bonds shows the reality that this firm bonds have a greater default risk and are ________ U.S. Treasury bonds.

A) much less liquid 보다 B) less speculative than C) tax-exempt unlike D) lower-yielding 보다

Which the the adhering to statements is TRUE?

A) State and local governments cannot default on their bonds. B) bond issued by state and also local federal governments are called municipal bonds. C) All government issued bonds—local, state, and also federal—are federal earnings tax exempt. D) The coupon payment on municipal binding is usually greater than the coupon payment ~ above Treasury bonds.

Everything else held constant, if the tax-exempt condition of municipal bonds to be eliminated, then

A) the interest rates on municipal bonds would still be much less than the interest rate on Treasury bonds. B) the interest price on municipal bonds would certainly equal the rate on Treasury bonds. C) the interest price on municipal bonds would certainly exceed the price on Treasury bonds. D) the interest rates on municipal, Treasury, and also corporate bonds would all increase.

Municipal bonds have default risk, yet your interest prices are lower than the prices on default-free Treasury bonds. This argues that

A) the benefit from the tax-exempt condition of municipal bonds is less than their default risk. B) the advantage from the tax-exempt condition of municipal bonds equals their default risk. C) the benefit from the tax-exempt standing of municipal bonds exceeds your default risk. D) Treasury bonds are not default-free.

Everything else organized constant, an increase in marginal tax prices would likely have actually the impact of ________ the need for municipal bonds, and also ________ the need for U.S. Government bonds.

A) increasing; raising B) increasing; to decrease C) decreasing; enhancing D) decreasing; diminish

Everything else organized constant, a diminish in marginal tax rates would likely have the impact of ________ the need for municipal bonds, and ________ the need for U.S. Government bonds.

A) increasing; boosting B) increasing; diminish C) decreasing; enhancing D) decreasing; to decrease

Everything else held constant, the interest rate on municipal bond rises loved one to the interest rate on Treasury securities when

A) revenue tax rates are lowered. B) revenue tax prices are raised. C) municipal binding become much more widely traded. D) corporate bonds end up being riskier.

Everything else organized constant, if income tax prices were lowered, then

A) the interest rate on municipal bonds would certainly fall. B) the interest rate on Treasury bonds would rise. C) the interest price on municipal bonds would certainly rise. D) the price the Treasury bonds would certainly fall.

Everything else organized constant, abolishing the individual revenue tax will

A) rise the interest rate on that company bonds. B) reduce the interest rate on municipal bonds. C) increase the interest rate on municipal bonds. D) boost the interest price on Treasury bonds.

Which that the adhering to statements are TRUE?

A) boost in tax prices will boost the demand for Treasury bonds, lowering their interest rates. B) since the tax-exempt standing of municipal bonds was of little benefit to bond holders as soon as tax rates were low, they had higher interest prices than U.S. Federal government bonds prior to World war II. C) Interest rates on municipal bonds will certainly be greater than comparable bonds there is no the tax exemption. D) due to the fact that coupon payments on municipal bonds room exempt native federal earnings tax, the supposed after-tax return top top them will be greater for individuals in lower income tax brackets.

The Obama administration increased the tax on the top revenue tax bracket indigenous 35% to 39%. Supply and also demand analysis predicts the influence of this change was a ________ interest price on municipal bonds and a ________ interest rate on Treasury bonds, every else the same.

A) higher; lower B) lower; reduced C) higher; greater D) lower; greater

Three factors describe the risk framework of interest rates

A) liquidity, default risk, and the earnings tax therapy of a security. B) maturity, default risk, and the earnings tax treatment of a security. C) maturity, liquidity, and also the revenue tax treatment of a security. D) maturity, default risk, and also the liquidity that a security.

The spread in between the interest rates on Baa this firm bonds and U.S. Government bonds is very huge during the an excellent Depression years 1930-1933. Explain this difference using the shortcut supply and also demand analysis.


Answer: throughout the great Depression plenty of businesses failed. The default threat for the corporate shortcut increased contrasted to the default-free Treasury bond. The demand for that company bonds reduced while the demand for Treasury bonds boosted resulting in a larger risk premium.


If the federal government where to raise the revenue tax rates, would this have actually any impact on a state"s price of take out loan funds? Explain.


Answer: Yes, if the federal federal government raises revenue tax rates, demand for municipal bonds which are federal income tax exempt would increase. This would reduced the interest rate on the municipal bonds for this reason lowering the price to the state of take out loan funds.


The term structure of interest prices is

A) the relationship among interest rates of different bonds v the very same maturity. B) the structure of how interest rates relocate over time. C) the relationship amongst the term come maturity of various bonds. D) the relationship among interest prices on bond with various maturities.

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

A) a risk-structure curve. B) a default-free curve. C) a yield curve. D) an interest-rate curve.

Differences in ________ describe why interest rates on Treasury securities are not every the same.

A) hazard B) liquidity C) time come maturity D) tax features

The typical shape because that a productivity curve is

A) gently increase sloping. B) mound shaped. C) flat. D) bowl shaped.

When yield curves space steeply increase sloping

A) long-term interest rates are above short-term attention rates. B) temporary interest prices are over long-term interest rates. C) momentary interest prices are about the very same as irreversible interest rates. D) medium-term interest rates are above both short-term and long-term interest rates.

When productivity curves room flat

A) permanent interest rates are over short-term attention rates. B) short-term interest prices are over long-term attention rates. C) short-term interest rates are about the same as irreversible interest rates. D) medium-term interest prices are over both short-term and also long-term attention rates.

When yield curves room downward sloping

A) permanent interest rates are above short-term attention rates. B) momentary interest rates are above long-term attention rates. C) short-lived interest rates are about the very same as permanent interest rates. D) medium-term interest rates are over both short-term and long-term attention rates.

Economists" make the efforts to explain the term structure of attention rates

A) show how economists modify theory to boost them when they space inconsistent through the empirical evidence. B) illustrate just how economists continue to accept theories that fail to describe observed behavior of interest price movements. C) prove that the real people is a special instance that often tends to get brief shrift in theoretical models. D) have proved entirely unsatisfactory come date.

According to the expectations theory of the term structure, the interest price on a long-term bond will certainly equal the ________ that the short-term interest prices that civilization expect to occur over the life of the permanent bond.

A) average B) amount C) difference D) lot of

If bonds with various maturities space perfect substitutes, then the ________ on these bonds have to be equal.

A) expected return B) surprised return C) surplus return D) overabundance return

If the expected route of one-year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and also 6 percent, then the expectations concept predicts that today"s interest rate on the five-year bond is

A) 4 percent. B) 5 percent. C) 6 percent. D) 7 percent.

If the expected path of 1-year interest prices over the next 4 years is 5 percent, 4 percent, 2 percent, and 1 percent, then the expectations concept predicts the today"s interest rate on the four-year link is

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

If the expected route of 1-year interest prices over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and also 5 percent, the expectations concept predicts the the bond through the highest possible interest rate today is the one through a maturity of

A) 2 years. B) 3 years. C) 4 years. D) five years.

If the expected path of 1-year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts the the bond v the lowest interest rate today is the one through a maturity of

A) one year. B) two years. C) three years. D) 4 years.

Over the next three years, the expected course of 1-year interest prices is 4, 1, and also 1 percent. The expectations theory of the term framework predicts the the existing interest rate on 3-year link is

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

According come the expectations theory of the term structure

A) the interest rate on permanent bonds will exceed the typical of short-term interest prices that human being expect to occur over the life of the irreversible bonds, because of their choice for momentary securities. B) interest rates on bonds of various maturities relocate together over time. C) buyers of bonds choose short-term to permanent bonds. D) buyers require second incentive to hold long-term bonds.

According to the expectations concept of the hatchet structure

A) as soon as the productivity curve is steeply upward sloping, momentary interest prices are expected to remain relatively stable in the future. B) once the productivity curve is bottom sloping, short-term interest prices are expected to remain relatively stable in the future. C) investors have solid preferences because that short-term loved one to irreversible bonds, explaining why productivity curves commonly slope upward. D) yield curves should be equally likely to slope downward together slope upward.

According to the segmented markets theory the the hatchet structure

A) binding of one maturity are close substitutes for bonds of other maturities, therefore, interest rates on binding of various maturities move together end time. B) the interest price for every maturity shortcut is established by supply and also demand for that maturity bond. C) investors" solid preferences for short-term relative to irreversible bonds describes why productivity curves frequently slope downward. D) because of the optimistic term premium, the yield curve will certainly not be it was observed to it is in downward-sloping.

According come the segmented sectors theory that the ax structure

A) the interest price on long-term bonds will certainly equal an average of short-term interest prices that civilization expect to take place over the life of the permanent bonds. B) buyers the bonds carry out not like bonds of one maturity end another. C) interest rates on binding of various maturities perform not move together over time. D) buyers require an additional incentive to hold long-term bonds.

A crucial assumption in the segmented markets theory is the bonds of various maturities

A) space not substitutes in ~ all. B) are perfect substitutes. C) are substitutes just if the investor is given a premium incentive. D) are substitutes however not perfect substitutes.

The segmented industries theory deserve to explain

A) why yield curves usually often tend to slope upward. B) why interest rates on binding of various maturities often tend to relocate together. C) why productivity curves tend to steep upward when short-term interest rates are low and to it is in inverted as soon as short-term interest rates are high. D) why yield curves have actually been supplied to forecast business cycles.

According come the liquidity premium concept of the ax structure

A) since buyers that bonds may prefer binding of one maturity end another, interest rates on bond of various maturities carry out not relocate together end time. B) the interest rate on permanent bonds will certainly equal an mean of temporary interest rates that human being expect to occur over the life that the permanent bonds add to a hatchet premium. C) because of the positive term premium, the yield curve will certainly not be it was observed to it is in downward sloping. D) the interest price for each maturity shortcut is determined by supply and demand for the maturity bond.

According to the liquidity premium concept of the term structure

A) bonds of various maturities are not substitutes. B) if productivity curves room downward sloping, then temporary interest prices are intended to fall by so lot that, even when the positive term premium is added, permanent rates fall below short-term rates. C) productivity curves must never steep downward. D) interest prices on binding of various maturities carry out not move together end time.

The additional incentive the the purchaser of a Treasury protection requires come buy a long-term security rather than a short-term protection is referred to as the

A) threat premium. B) term premium. C) taxes premium. D) sector premium.

If 1-year interest rates for the following three years room expected to it is in 1, 1, and 1 percent, and also the 3-year term premium is 1 percent, 보다 the 3-year bond price will be

A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.

If 1-year interest prices for the next 5 years space expected to it is in 4, 2, 5, 4, and 5 percent, and also the 5-year hatchet premium is 1 percent, 보다 the 5-year bond rate will be

A) 2 percent. B) 3 percent. C) 4 percent. D) 5 percent.

According come the liquidity premium concept of the ax structure, a steeply upward sloping yield curve shows that short-lived interest rates are supposed to

A) increase in the future. B) continue to be unchanged in the future. C) decline moderately in the future. D) decline sharply in the future.

According come the liquidity premium concept of the term structure, a slightly increase sloping productivity curve shows that short-lived interest rates are intended to

A) rise in the future. B) remain unchanged in the future. C) decrease moderately in the future. D) decline sharply in the future.

According to the liquidity premium theory of the hatchet structure, a level yield curve shows that short-lived interest prices are supposed to

A) climb in the future. B) stay unchanged in the future. C) decrease moderately in the future. D) decrease sharply in the future.

According come the liquidity premium concept of the ax structure, a bottom sloping productivity curve indicates that temporary interest prices are intended to

A) increase in the future. B) stay unchanged in the future. C) decrease moderately in the future. D) decrease sharply in the future.

According to the liquidity premium theory, a yield curve the is flat way that

A) link purchasers mean interest prices to increase in the future. B) bond purchasers suppose interest rates to remain the same. C) shortcut purchasers suppose interest rates to autumn in the future. D) the yield curve has actually nothing to execute with expectations of shortcut purchasers.

If the yield curve is flat for brief maturities and also then slopes bottom for longer maturities, the liquidity premium concept (assuming a mild preference for shorter-term bonds) shows that the market is predicting

A) a climb in momentary interest rates in the near future and a decline further out in the future. B) constant short-term interest prices in the close to future and a decrease further out in the future. C) a decrease in short-lived interest prices in the close to future and also a rise additional out in the future. D) a decrease in short-lived interest prices in the near future and an also steeper decline further out in the future.

If the yield curve slope is level for quick maturities and also then slopes steeply increase for longer maturities, the liquidity premium concept (assuming a mild choice for shorter-term bonds) shows that the sector is predicting

A) a increase in short-lived interest rates in the near future and also a decrease further out in the future. B) consistent short-term interest prices in the close to future and further out in the future. C) a decline in momentary interest rates in the close to future and a rise additional out in the future. D) continuous short-term interest rates in the close to future and also a decrease further the end in the future.

If the yield curve has a mild increase slope, the liquidity premium theory (assuming a mild choice for shorter-term bonds) shows that the sector is predicting

A) a rise in short-term interest rates in the near future and a decline further the end in the future. B) consistent short-term interest rates in the near future and also further the end in the future. C) a decrease in short-lived interest prices in the close to future and a rise additional out in the future. D) a decline in short-term interest prices in the close to future and also an even steeper decline further the end in the future.

The desired habitat theory of the term structure is very closely related to the

A) expectations concept of the hatchet structure. B) segmented industries theory that the ax structure. C) liquidity premium concept of the hatchet structure. D) the inverted productivity curve theory of the ax structure.

The expectation theory and the segmented sectors theory perform not define the facts an extremely well, yet they carry out the groundwork for the many widely accepted theory of the term framework of attention rates

A) the Keynesian theory. B) the separable markets theory. C) the liquidity premium theory. D) the asset market approach.

The ________ that the term framework of interest prices states that the interest price on a permanent bond will certainly equal the median of short-term interest prices that individuals expect to occur over the life of the permanent bond, and also investors have actually no preference for short-lived bonds family member to irreversible bonds.

A) segmented industries theory B) expectations concept C) liquidity premium concept D) separable sectors theory

According come this concept of the term structure, bonds of various maturities room not substitutes because that one another.

A) segmented markets theory B) expectations theory C) liquidity premium concept D) separable industries theory

In yes, really practice, momentary interest rates and also long-term interest rates usually relocate together; this is the major shortcoming of the

A) segmented markets theory. B) expectations theory. C) liquidity premium theory. D) separable sectors theory.

The ________ that the hatchet structure states the following: the interest rate on a irreversible bond will equal an median of short-lived interest rates expected to happen over the life of the permanent bond to add a term premium the responds to supply and demand conditions for that bond.

A) segmented sectors theory B) expectations concept C) liquidity premium theory D) separable industries theory

A an especially attractive attribute of the ________ is that it speak you what the industry is predicting around future short-term interest prices by simply looking in ~ the steep of the productivity curve.

A) segmented markets theory B) expectations theory C) liquidity premium theory D) separable industries theory
*

The steeply upward sloping productivity curve in the figure above indicates that

A) short-lived interest rates are expected to rise in the future. B) momentary interest rates are expected to loss moderately in the future. C) momentary interest prices are expected to autumn sharply in the future. D) temporary interest rates are intended to stay unchanged in the future.
*

The steeply increase sloping productivity curve in the figure over indicates the ________ interest prices are expected to ________ in the future.

A) short-term; increase B) short-term; autumn moderately C) short-term; continue to be unchanged D) long-term; loss moderately
*

The U-shaped yield curve in the figure over indicates that temporary interest prices are expected to

A) climb in the near-term and also fall later on. B) autumn sharply in the near-term and rise later on on. C) loss moderately in the near-term and also rise later on on. D) stay unchanged in the near-term and also rise later on on.
*

The U-shaped yield curve in the figure above indicates that the inflation rate is supposed to

A) remain constant in the near-term and also fall later on. B) autumn sharply in the near-term and also rise later on on. C) rise moderately in the near-term and also fall later on. D) remain continuous in the near-term and also rise later on.
*

The mound-shaped yield curve in the figure over indicates that momentary interest prices are expected to

A) increase in the near-term and fall later on on. B) autumn moderately in the near-term and rise later on on. C) fall sharply in the near-term and rise later on. D) remain unchanged in the near-term and fall later on on.
*

The mound-shaped productivity curve in the figure above indicates the the inflation price is expected to

A) remain continuous in the near-term and fall later on on. B) loss moderately in the near-term and also rise later on. C) increase moderately in the near-term and fall later on. D) continue to be unchanged in the near-term and also rise later on.

An inverted productivity curve predicts that momentary interest rates

A) space expected to climb in the future. B) will rise and also then loss in the future. C) will remain unchanged in the future. D) will fall in the future.

When short-term interest prices are supposed to fall sharply in the future, the yield curve will

A) slope up. B) it is in flat. C) it is in inverted. D) it is in an inverted U shape.

If investors suppose interest prices to fall substantially in the future, the productivity curve will be inverted. This method that the productivity curve has actually a ________ slope.

A) steep upward B) slight upward C) level D) downward

When the productivity curve is flat or downward-sloping, it indicate that the economy is much more likely come enter

A) a recession. B) an expansion. C) a boom time. D) a period of enhancing output.

A ________ yield curve predicts a future rise in inflation.

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A) steeply increase sloping B) slight increase sloping C) level D) bottom sloping

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


Answer: The productivity curve should have a steep increase slope. In the name of interest rates will boost if the inflation rate increases, therefore, bond purchasers will need a greater term premium to host the riskier irreversible bond.