Just wanting the answers, no need for an explanation for each. These are part of
ID: 1107938 • Letter: J
Question
Just wanting the answers, no need for an explanation for each. These are part of a study guide questions for an exam I have been studying for and I want check if my answers are correct
26. The yield curve b mhous the riak on bonds as measired by the bond rating agencies ploted agains heir years to maturity c shows the risk premia on bonds for a given maturity d. shows the bonds. e. is unaffected by systematic risk 27. The expectations theory of the term structure of interest rates explains a why short- and long-term interest rates tend to move up and down together b. why short-term interest rates are more volatile than long-term rates. c. how risk affects interest rates d. all of the above. e. only (a) and (b). - .28. In the expectations theory, the interest rate on a 2-year bond may be represented as: b.12t=(1 +1.)(1 + i )/2. 29. Assume the Expectations Hypothesis regarding the term structure of interest rates is correct Then, if the current two-year interest rate is 5% and the current one-year rate is 6%, then investors expect: a. the future one-year rate to be 4%. b, the future one-year rate to be 596. C. the future one-year rate to be 6% d, the future one-year rate to be 1%. 30. The yield on a 30-year US Treasury security is 6.5%; the yield on a 2-year U.S. Treasury bond is 4.0%. This data: a. indicate the yield curve is downward sloping. b. indicate the yield curve is flat since the risk premium needs to be added for longer maturities. c. indicate the yield curve is upward sloping. d. indicate that people expect inflation to decrease in the future. 31. One characteristic that distinguishes holding period return from the coupon rate, the current yield, and the yield to maturity is: a. all of the other returns can be calculated at the time the bond is purchased, but holding period return cannot. b. holding period return will always be the highest return. c. holding period return will usually be less than the other returns d. only the holding period return includes the capital gain/loss. 32. Suppose that general business conditions improve, and in addition, wealth increases. Based on this information, we know for sure that a. bond prices increase. b. yield to maturity decreases c-the real interest rate increases. d. the quantity of bonds increases.Explanation / Answer
Q 26
Yield curve is alos known as term strcture a graph plotted for yieldsd of similar quality bonds ranging from short to long maturity.
Hence option D goes well.
Q 27
Expectation theory of interest rate is defines 3 facts as follows
1. Bonds with similar risk profiles tend to move togehter for short term and long term maturities.over the time.
2. Yields on short term bonds are more volatile than long term bonds.
3. Liquidity Premium theory- Long term yields tend to be higher than short term yields.
Hence Option D follows here.
Q 29.
According to Expectations theory iterest on a long bond is equals to the avarage of short term bonds over a period of long term bond maturity.
Hence option D
Q 30
As interest rate increasing for bonds as time to maturity increasing hence the increasing function here term struture curve is upward sloping
hence option C
Q 29.
I t+2 = (I t + I (t+1, t+2))/2
5 = (6 + x)/2 =3+(x/2)
x = 4%
Hence Option A
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