Question 13 Widening term spreads on government bonds, along with the narrowing of risk spreads between government and corporate bonds could be Select one: a. A sign that markets anticipate deflation and a contraction in the economy b. A sign that markets anticipate a revival of the economy and possibly inflation c. A sign that markets anticipate a revival of the economy and deflation d. A sign of the flight to quality because markets are worried about the future Question 14 Assuming the expectations hypothesis holds, if yields on government bonds of maturities 1 to 3 years are as follows: yield on 1-year government bond is 5%, yield on 2-year government bond 7% yield on 3-year government bon 8% Which of the following is true? Select one: a. markets expect interest rates to be 6% in year 2. b. markets expect interest rates to be 9% in year 2. c. markets expect interest rates to be 6.3 % in year 3. d. all of the above could hold Question 15 If all bonds were to be treated equally by the tax authorities in the US, then Select one: a. the yield on municipal bonds will rise b. the yield on municipal bonds will fall c. all bonds will offer the same yield d. none of the above Question 16 An inverted yield curve is consistent with all of the following except: Select one: a. Term spreads become negative b. Risk spreads become negative c. Price of long-term bonds is higher than short-term bonds d. Markets anticipate lower interest rates in the future
Question 13
Widening term spreads on government bonds, along with the narrowing of risk spreads between government and corporate bonds could be
Select one:
a. A sign that markets anticipate deflation and a contraction in the economy
b. A sign that markets anticipate a revival of the economy and possibly inflation
c. A sign that markets anticipate a revival of the economy and deflation
d. A sign of the flight to quality because markets are worried about the future
Question 14
Assuming the expectations hypothesis holds, if yields on government bonds of maturities 1 to 3 years are as follows:
yield on 1-year government bond is 5%,
yield on 2-year government bond 7%
yield on 3-year government bon 8%
Which of the following is true?
Select one:
a. markets expect interest rates to be 6% in year 2.
b. markets expect interest rates to be 9% in year 2.
c. markets expect interest rates to be 6.3 % in year 3.
d. all of the above could hold
Question 15
If all bonds were to be treated equally by the tax authorities in the US, then
Select one:
a. the yield on municipal bonds will rise
b. the yield on municipal bonds will fall
c. all bonds will offer the same yield
d. none of the above
Question 16
An inverted yield curve is consistent with all of the following except:
Select one:
a. Term spreads become negative
b. Risk spreads become negative
c. Price of long-term bonds is higher than short-term bonds
d. Markets anticipate lower interest rates in the future
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