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1. Inflation affects the equilibrium yield on bonds due to its impact on

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1. Inflation affects the equilibrium yield on bonds due to its impact on;A. the demand for bonds.;B. the supply and demand for bonds.;C. Inflation has no effect on bond yields.;D. the supply of bonds.;2. Which of the following factors could explain difference in yields on bonds with the same time to maturity?;A. default risk;B. interest rate risk;C. credit risk;D. all of the above;3. Ratings from Moody's and S&P measure;A. liquidity risk.;B. interest rate risk.;C. default risk.;D. all of the above.;4. Junk bonds tend to have;A. higher risk premia.;B. higher yields.;C. higher default risk.;D. all of the above.;5. If the Federal Reserve wants to increase the equilibrium interest rate, it will _____ the _____ money.;A. decrease, supply of;B. increase, demand for;C. increase, supply of;D. decrease, demand for;6. A bond is bought at par and market yields rise after purchase. If the bond is held to maturity, the rate of return at;maturity will be _____ the yield at purchase.;A. greater than;B. less than;C. equal to;D. Cannot be determined.;7. Municipal bonds tend to have lower yields than other bonds, ceteris paribus, due to;A. higher default risk.;B. lower taxes.;C. higher liquidity.;D. None of the above.;8. Which of the following shifts the demand for bonds to the right?;A. An increase in the price level;B. A decrease in GDP;C. An increase in the interest rate;D. None of the above.;9. For a coupon bond, if the yield to maturity is greater than the coupon rate, then the price must be greater than the;face value.;True;False;10. An increase in the expected return on bonds causes the _____ bonds to shift and equilibrium interest rates;to _____.;A. supply of, rise;B. demand for, fall;C. demand for, rise;D. supply of, fall;11. The Federal Reserve controls the demand for bonds, so it is vertical.;True;False;12. An AAA bond has lower default risk than a BBB bond.;True;False;13. A three-year coupon bond has a face value of $1,000, a coupon rate of 7%, and a yield to maturity of 10%. The;price of the bond must be _____ $1,000.;A. greater than;B. less than;C. equal to;D. Cannot be determined.;14. A change in the risk of a bond affects the bond's risk premium.;True;False;15. If yields on one-year bonds are expected to rise and the liquidity premium is zero, the yield curve will be;A. upward-sloping.;B. flat.;C. downward-sloping.;D. Cannot be determined.;16. The opportunity cost of money is;A. growth rate of prices;B. real GDP;C. interest rate;D. None of the above.;17. The price of a bond is inversely related to;A. the time to maturity.;B. the yield to maturity.;C. both of the above.;D. neither of the above.;18. What are the reasons for the general fall in interest rates between 1920 and World War II?;A. An increase in the demand for bonds;B. An increase in the supply of bonds;C. Poor business conditions and low confidence in public policies;D. High taxes and stringent government regulations;19. The present value of a discount bond with one year to maturity, face value $1,000, and yield to maturity 5% is;A. $1,050.00;B. $1,000.00;C. $1,005.00;D. $952.38;20. After 100 years, a deposit of $1 that compounds annually at 1% returns;A. $2;B. $2.70;C. $100;D. None of the above.

 

Paper#18325 | Written in 18-Jul-2015

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