The relationship among interest rates on bonds with identical default risk, but different maturities, is called...

The relationship among interest rates on bonds with identical default risk, but different maturities, is called the:

A time‑risk structure of interest rates. (incorrect)

B liquidity structure of interest rates (incorrect)

C bond demand curve. (incorrect)

D the liquidity premium curve.

E None of them.

However, over thinking it with D OR E correct answer should be yield curve HELP!

Expert Solution

The relationship between interest rate of Bond with different maturity but similar risk is known as term structure of interest rate.

All the other options are not mentioning the term structure of the interest rate so all of the options are false.

Correct answer will be option (E) none of the above.

jeff jeffy answered 2 years ago

a. Describe the relationship between the interest rates on bonds of different maturities. b. If we...

a. Describe the relationship between the interest rates on bonds of different maturities. b. If we follow the Expectation Hypothesis, calculate the interest rate on a 3-year bond if a 1-year bond has an interest rate of 2% and is expected to have an interest rate of 3% next year, and 5% in two years. c. How does the Liquidity Premium Theory explain an upward-sloping yield curve during normal economic environment? d. Explain the economic implications of an inverted yield...

The following table summarizes current prices of various default-free bonds with different maturities. Interest is paid...

The following table summarizes current prices of various default-free bonds with different maturities. Interest is paid semi-annually. Year to maturity Counpon rate(%) Spot price(￡) 0.5 0.0 96.15 1.0 0.0 92.19 1.5 8.5 99.45 2.0 9.0 99.64 3.1 Compute the yield to maturity (YTM) and the theoretical spot rate for each of the four bonds. (14%) 3.2 Based on your answer in 3.1, compute, under the pure expectations theory, the forward rate on the six-month default-free bond six months from now....

_____________ can explain why the interest rates on bonds of different maturities tend to move together....

_____________ can explain why the interest rates on bonds of different maturities tend to move together. Select one: Only the expectations theory Both the segmented markets theory and the liquidity premium theory Both the expectations theory and the liquidity premium theory Only the liquidity premium theory Only the segmented markets theory

3.A plot of the interest rates on default-free government bonds with different terms to maturity is...

3.A plot of the interest rates on default-free government bonds with different terms to maturity is called a yield curve an interest-rate curve a default-free curve a risk-structure curve 4.Which of the following statements accurately describes the two measures M1 and M2 of the money supply? M2 is the narrowest measure the Fed reports The two measures do not move together, so they cannot be used interchangeably by policymakers The two measures' movements closely parallel each other, even on a...

Which of the following is INCORRECT regarding interest rates? Bonds with greater default risk typically trade...

Which of the following is INCORRECT regarding interest rates? Bonds with greater default risk typically trade at higher yield-to-maturities. A positive term premium is caused in part by borrowers’ preference for long duration and lenders’ preference for short duration. An inverted yield curve serves as a negative indicator for the future state of the economy. Zero-coupon bonds are less sensitive to interest rate changes than coupon bonds with the same time to maturity. The yield curve typically slopes upward due...

Current interest rates for Treasury securities of different maturities are as follows:

Current interest rates for Treasury securities of different maturities are as follows:1-year: 1.50%2-year: 2.25%3-year: 3.25%Assuming the liquidity premium theory is correct, what did investors think the interest rate would be on the one-year Treasury bill in two years if the term premium on a two-year Treasury note is 0.15% and the term premium on a three-year Treasury note is 0.25%?

Below is information on several bonds of different maturities and coupon rates that trade in the...

Below is information on several bonds of different maturities and coupon rates that trade in the same market. If the bonds pay a coupon, you may assume that the coupon is paid semi-annually, with the next coupon payment six months away. All bonds have a face value of $1,000. For Bonds 1-4, assuming that they are fairly valued, calculate the spot interest rates for maturities of 0.5, 1.0, 1.5 and 2.0 years. What is the Yield to Maturity (YTM) for...

Fixed rate bonds with longer maturities are more sensitive to changes in interest rates than bonds...

Fixed rate bonds with longer maturities are more sensitive to changes in interest rates than bonds with shorter maturities. How are bonds valued? Explain why longer maturities should be more sensitive to changes in interest rates. Be sure to include in your answer a discussion of Duration. If you strongly believe that interest rates are bound to fall, what trading strategy should you implement? Explain why this strategy you are proposing would be superior by comparing it to another strategy...

_____________ can explain why the interest rates on bonds ofdifferent maturities tend to move together....

_____________ can explain why the interest rates on bonds of different maturities tend to move together.Select one:Both the expectations theory and the liquidity premium theoryOnly the liquidity premium theoryOnly the segmented markets theoryBoth the segmented markets theory and the liquidity premium theoryOnly the expectations theory

Explain intuitively why bonds with longer maturities are more sensitive to changes in interest rates?

Question