WebCh5- Practice Questions. Term. 1 / 45. 1) The term structure of interest rates is. A) the relationship among interest rates of different bonds with the same risk and maturity. B) the structure of how interest rates move over time. C) the relationship among the terms to maturity of different bonds from different issuers. WebA) the amount of additional interest necessary to compensate savers for the greater risk of default on some bonds. B) the relationship among the interest rates on similar bonds with different maturities. C) the relationship among the …
(2) Assume "expectation theory" of term structure is Chegg.com
WebFinance questions and answers. 11) According to the liquidity premium theory of the term structure A) bonds of different maturities are not substitutes B) if yield curves are downward sloping, then short-term interest rates are expected to fall by so much that, even when the positive term premium is added. long-term rates fall below short-term ... WebA) view bonds of different maturities as perfect substitutes. B) view bonds of different maturities as completely unsubstitutable. C) always choose the bond with the highest expected return, regardless of maturity. D) care about both expected returns and time to maturity. D) care about both expected returns and time to maturity. dept of interior employee express
Solved 11) According to the liquidity premium theory of the - Chegg
Web(a) Under the expectations theory of the term structure, if 30-year bonds become less desirable, this will increase the demand for bonds of other maturities, since they are viewed as perfect substitutes. The result is a higher price and a lower yield at all other maturities, and an increase in yield at the end of the yield curve. WebUse the bond model of supply and demand to illustrate your answer. (iii) Show the impact of QE on the yield curve in this case. Repeat question (2), assuming that “segmented market” theory is your frame work, i.e. bonds of different maturities are … WebDecrease; because bonds have become less liquid. In the theory of asset demand, what are the four factors that affect whether to buy one asset, rather than another? 1. Wealth 2. Expected return relative to alternative assets 3. Risk relative to alternative assets 4. Liquidity relative to alternative assets dept of interior address dc