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Tarleton ECO303 quiz 2




Question;? 0 out of 6.6666 points;The default risk premium is;Answers;relevant only for securities issued by very;small companies.;the additional yield a saver requires for;holding a bond with some default risk.;zero for corporate bonds, but quite substantial;for corporate stock.;constant across the business cycle.;? Question 2;0 out of;6.6666 points;The bond demand curve slopes down because;Answers;interest rates decline as bond prices decline.;when bond prices are low, inflation is low.;the investor (saver) is willing and able to;purchase more bonds when the price of the bond is low.;the borrower is willing and able to purchase;more bonds when the price of the bond is low.;? Question 3;6.6666;out of 6.6666 points;According to the Fisher effect, an increase in;expected inflation results in;Answers;lower nominal interest rates.;higher nominal interest rates.;lower real interest rates.;higher real interest rates.;? Question 4;6.6666;out of 6.6666 points;The term structure of interest rates;Answers;represents the relationship among the interest;rates on bonds that are otherwise similar but that have different;maturities.;reflects differing tax treatment received by;different instruments.;always results in an upward-sloping yield;curve.;usually results in a downward-sloping yield;curve.;? Question 5;0 out of;6.6666 points;The demand curve for bonds would be shifted to;the left by an;Answers;increase in wealth.;increase in expected returns on bonds.;increase in expected inflation.;increase in the liquidity of bonds relative to;other assets.;? Question 6;6.6666;out of 6.6666 points;The risk structure of interest rates refers to;Answers;the amount of additional interest necessary to;compensate savers for the greater risk of default on some bonds.;the relationship among the interest rates on;similar bonds with different maturities.;the relationship among the interest rates on;bonds with the same maturity.;the amount of additional yield necessary to;compensate savers for the lesser liquidity of some bonds.;? Question 7;6.6666;out of 6.6666 points;As wealth increases in the economy, we would;expect to observe;Answers;both bond prices and interest rates will rise.;bond prices will rise and interest rates fall;bond prices will fall and interest rates rise;both bond prices and interest rates will fall.;? Question 8;6.6666;out of 6.6666 points;Muncipal bonds are isued;Answers;by foreign governments;by private corporations;by local and state governments;by the federal government;? Question 9;6.6666;out of 6.6666 points;According to the liquidity premium theory, what;does a flat yield curve indicate?;Answers;Short-term interest rates are expected to;remain stable.;Short-term interest rates are expected to rise.;Short-term interest rates are expected to fall.;Long-term interest rates are expected to fall.;? Question 10;0 out of;6.6666 points;The supply curve for bonds would be shifted to;the left by;Answers;a decrease in government borrowing.;a decrease in the corporate tax on profits.;an increase in tax subsidies for investment.;an increase in expected inflation.;? Question 11;6.6676;out of 6.6676 points;A portfolio is a;Answers;brokerage house specializing in the trading of;common stock.;brokerage house specializing in the trading of;corporate bonds.;measure of the risk involved with a holding a;particular asset.;collection of assets.;? Question 12;6.6666;out of 6.6666 points;A one-year discount bond with a face value of;$10,000 that is currently selling for $9400 has an interest rate of;Answers;3.10%.;6%.;6.38%.;60%.;? Question 13;0 out of;6.6666 points;During the financial crisis of 2007-2009;Answers;mortgage-backed securities became more liquid.;information costs of mortgage-backed securities;rose.;information costs of mortgage-backed securities;declined.;the tax treatment of mortgage-backed securities;was changed.;? Question 14;0 out of;6.6666 points;Which best describes the relationship between the;cost of acquiring information and return?;Answers;A high return must compensate for a high cost;of acquiring information.;A higher cost of information corresponds with a;low return.;A low cost of acquiring information corresponds;with a high return.;A higher return results in a lower cost of;acquiring information.;? Question 15;6.6666;out of 6.6666 points;A flight to quality refers to a shift by savers;from;Answers;bonds and into stocks.;stocks and into gold or other precious metals.;bonds and into real assets, such as real;estate.;low-quality bonds and into high-quality bonds.


Paper#56685 | Written in 18-Jul-2015

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