Chapter 3
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Structure of Interest Rates
三湖慈鲷鱼1. Default risk is likely to be highest for
A) shortterm Treasury curities.
B) AAA corporate curities.
C) longterm Treasury curities.
D) BBB corporate curities.
ANSWER: D
2. If a curity can easily be converted to cash without a loss in value, it
A) is liquid.
B) has a high aftertax yield.
C) has high default risk.
D) is illiquid.
ANSWER: A
3. If all other characteristics are similar, ______ would have to offer ______.
A) taxable curities; a higher aftertax yield than taxexempt curities
B) taxable curities; a higher beforetax yield than taxexempt curities
C) taxexempt curities; a higher aftertax yield than taxable curities
D) taxexempt curities; a higher beforetax yield than taxable curities
ANSWER: B
4. Assume an investor’s tax rate is 25 percent. The beforetax yield on a curity is 12 percent. What is the aftertax yield?
A) 16.00 percent
B) 9.25 percent
C) 9.00 percent
D) 3.00 percent
E) none of the above
ANSWER: C
5. An investor’s tax rate is 30 percent. What must the beforetax yield on a curity be to have an aftertax yield of 11 percent?
A) 7.7 percent
B) 15.71 percent
C) 130 percent
D) 11.00 percent
E) none of the above
ANSWER: B
6. Holding other factors such as risk constant, the relationship between the maturity and annualized yield of curities is called the
A) term structure of interest rates.
B) default structure of interest rates.
C) liquidity structure of interest rates.
D) tax structure of interest rates.
E) none of the above
ANSWER: A
7. If shorter term curities have higher annualized yields than longer term curities, the yield curve
A) is horizontal.
B) is upward sloping.
C) is downward sloping.
D) cannot be determined unless we know additional information (such as the level of market interest rates).
ANSWER: C
8. Assume that annualized yields of shortterm and longterm curities are equal. If inv
estors suddenly believe interest rates will increa, their actions may cau the yield curve to
A) become inverted.
B) become flat.
C) become upward sloping.
D) be unaffected.
ANSWER: C
9. If issuers of curities (borrowers) and investors suddenly expect interest rates to decrea, their actions to benefit from their expectations should cau
A) longterm yields to ri.
B) shortterm yields to decrea.
C) prices of longterm curities to decrea.
D) A and B
E) none of the above
ANSWER: E
10. The theory for the term structure of interest rates that says the shape of the yield curve is determined solely by expectations of future interest rates is called the
A) gmented markets theory.
B) liquidity premium theory.
C) pure expectations theory.
D) theory of rational expectations.
ANSWER: C
11. Assume investors are indifferent among curity maturities. Today, the annualized 2year interest rate is 12 percent, and the 1year interest rate is 9 percent. What is the forward rate according to the pure expectations theory?征稿
A) 15.08 percent
B) 3.00 percent
冬季养花C) 12.00 percent
D) 12.62 percent
E) 11.41 percent
ANSWER: A
12. The degree to which the Treasury’s debt management policy could affect the term structure of interest rates is greatest if
A) most debt is financed by foreign investors.
B) the Treasury’s debt level is small.
C) maturity markets are gmented.
D) a and b.
ANSWER: C
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13. According to the pure expectations theory of the term structure of interest rates, the ______ the difference between the implied oneyear forward rate and today’s oneyear interest rate, the ______ is the expected change in the oneyear interest rate.
A) greater; less
狮子座简谱B) less; greater
C) greater; greater
D) less; less
E) c and d
ANSWER: E 仲永
14. Assume that today, the annualized twoyear interest rate is 12 percent, and the oneyear interest rate is 9 percent. A three-year curity has an annualized interest rate of 14 percent. What is the oneyear forward rate two years from now?
A) 12.67 percent
B) 113 percent
C) 195 percent咖啡色英文
D) 15.67 percent
E) none of the above
ANSWER: E 毒龙是什么玩法
15. Assume that a yield curve is influenced by interest rate expectations and a liquidity premium. Assume the yield curve is initially flat. If liquidity suddenly was no longer important, the yield curve would now have a ______ (assuming no other changes).
A) slight downward slope
B) slight upward slope
C) steep upward slope
D) steep downward slope
ANSWER: A
16. According to the liquidity premium theory, the expected yield on a twoyear curity will ______ the expected yield from concutive investments in oneyear curities.
