These are true or false questions, and please give explanations: 1. If the forward rate between...

These are true or false questions, and please give explanations:

1. If the forward rate between two periods exceeds the expected short rate between them, there is an arbitrage opportunity.

2. Given the liquidity preference hypothesis, investing a longer maturity bond is expected to return more than investing in short maturity bonds and "rolling them over" when they mature.

Expert Solution

1.) This statement is true.

This is because the forward rate is calculated by the expected short-term rate between the time of entering the forward and the time of the expiration of the forward. If the short term rate is higher than the forward-rate, an arbitrageur will sell the forward and buy the spot, thus encashing the interest rate differential between the forward rate and the short-term rate.

2) This statement is true.

According to the liquidity preference hypothesis, longer-term maturity bonds pay the investor a higher return as long-term maturities have higher risks. This is due to the fact that short-term maturity bonds have higher liquidity, ie. investor can liquidate the bond in a short time that in longer-term maturity bonds. Also, this higher liquidity gives the investor an opportunity to speculate on the interest rate. If the interest rate increase, the investor can re-invest in higher interest rate bonds.

Hence, due to the lower liquidity (and hence lower speculative power) and higher risks in the longer-term bonds, they must compensate investors with higher returns than short-maturity bonds.

jeff jeffy answered 2 years ago

Which of the following are true and which are false? Give brief explanations.

Which of the following are true and which are false? Give brief explanations.a) In a fully observable, turn-taking, zero-sum game between two perfectly rational players, it does not help the first player to know what strategy the second player is using—that is, what move the second player will make, given the first player's move.b) In a partially observable, turn-taking, zero-sum game between two perfectly rational players, it does not help the first player to know what move the second player...

True/False Questions (with explanations) 1. For a normal form game, a strategy is a probability distribution...

True/False Questions (with explanations) 1. For a normal form game, a strategy is a probability distribution over the set of outcomes. (T/F) 2. For a mixed strategy Nash equilibrium of a normal form game, Bob is mixing over two actions A and B. Bob can change his payoff by reducing the probability of playing A and increasing the probability of playing B? (T/F)

True or False Questions: Please answer true or false. 1. Even when care is free at...

True or False Questions: Please answer true or false. 1. Even when care is free at the point of service, we would expect low and high-income individuals with the same level of need to demand different quantities of health care. 2. We would expect the demand curve for physician visits to be more price elastic than the demand curve for inpatient hospital care. 3. A decision by the provincial governments to include counseling by psychologists within the public insurance plan...

Please answer these TRUE or FALSE questions. 1. True or False. The Born-Oppenheimer approximation accounts for...

Please answer these TRUE or FALSE questions. 1. True or False. The Born-Oppenheimer approximation accounts for scattering. 2. True or False. Tunneling is one way to approximate the solution to the Free Particle. 3. True or False. The coordinate version (x,y,z) of the Free Particle wavefunction can be normalized by including time. 4. The spin quantum number is used when combining the Hydrogen Atom and Free Particle models together.

Please answer with true and false answers, but use your explanations why it would true or...

Please answer with true and false answers, but use your explanations why it would true or false and use diagrams if necessary. 5. Suppose firms see inventories levels fall below the levels they had planned. This will cause aggregate output to increase. 6. Ceteris paribus, an increase in the domestic price level increases the price of domestic goods increases relative to foreign goods resulting in a downward shift of aggregate expenditures and a leftward shift of the aggregate demand curve....

True or False. Please give an explanation as to why its true or false. Too much...

True or False. Please give an explanation as to why its true or false. Too much leverage on a company’s balance sheet will increase the company’s cost of equity/

Please answer these with true and false answer, but use your explanations. Use diagrams if necessary....

Please answer these with true and false answer, but use your explanations. Use diagrams if necessary. 1. Ian buys 100 shares of a hot cannabis stock for $1 each on the stock market and pays a brokerage commission of $9.99. The transaction adds $109.99 to GDP. 2. If the result of cannabis legalization in Canada is that the value added from the illegal transactions moves to a legal market, then GDP will increase and so will economic well-being. 3. Imagine...

True or False Questions: Determine if true or false. If false why? 1) Premature efforts to...

True or False Questions: Determine if true or false. If false why? 1) Premature efforts to treat problem behavior before determining its function can be inefficient, ineffective, and even harmful. 2) Research has found that functional analyses conducted in natural environments (e.g., classroom settings) often yield the same (or even clearer) results compared to those conducted in simulated settings. 3) Problem behavior can only be maintained by one function. Behaviors are not multi-functional. 4) Indirect functional assessment procedures are referred...

Please answer these questions ! 1. True or False: Measuring a sample is generally just as...

Please answer these questions ! 1. True or False: Measuring a sample is generally just as expensive as measuring a population. Select one: True False 2. A probability distribution has a mean of 50 and a standard deviation of 15. We plan to take a sample of 35 observations. What is the probability that the sample mean is between 53 and 54? Select one: a. 0.1554 b. 0.8239 c. 0.4971 d. 0.0619

Answer the following questions True or False. Write “True” or “False” in the blank. 1._________ The...

Answer the following questions True or False. Write “True” or “False” in the blank. 1._________ The rate constant changes if the concentrations of the reactant change. 2._________ If the concentration of a reactant changes, the rate of the reaction always changes. 3._________ The coefficients of the overall reaction tell us the order for each reactant. 4._________ The half-life for a first order reaction does not depend on the initial concentration. 5._________ If the rate of a reaction over a long...

Question