Question

In: Finance

Which of the following is/are correct regarding interest rates? Pick all the correct ones. Borrowers’ preference...

Which of the following is/are correct regarding interest rates? Pick all the correct ones.

Borrowers’ preference for long duration and lenders’ preference for short duration causes the term premium to be positive.

Bonds with greater default risk typically trade at lower yield-to-maturities.

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 compared to coupon bonds with the same time to maturity.

The yield curve is usually flat.

Solutions

Expert Solution

Borrowers’ preference for long duration and lenders’ preference for short duration causes the term premium to be positive.

An inverted yield curve serves as a negative indicator for the future state of the economy.


Related Solutions

Which of the following is/are correct regarding interest rates? Choose all the correct answers. a. Borrowers’...
Which of the following is/are correct regarding interest rates? Choose all the correct answers. a. Borrowers’ preference for long duration and lenders’ preference for short duration causes the term premium to be positive. b. Zero-coupon bonds are less sensitive to interest rate changes compared to coupon bonds with the same time to maturity. c. The yield curve is usually flat. d. Bonds with greater default risk typically trade at lower yield-to-maturities. e. An inverted yield curve serves as a negative...
Which of the following would be correct assuming that interest rates decrease? A. The price of...
Which of the following would be correct assuming that interest rates decrease? A. The price of a bond will decrease while the reinvestment income will increase. B. The price of a bond will decrease while the reinvestment income will decrease. C. The price of a bond will increase while the reinvestment income will decrease. D. The price of a bond will increase while the reinvestment income will increase. E. none of the above is correct. Which of the following is...
Which of following is/are correct regarding stocks? Choose all correct answers. a. An already public company...
Which of following is/are correct regarding stocks? Choose all correct answers. a. An already public company issuing more shares to raise capital is referred to as an SEO. b. Stocks are generally riskier than bonds. c. Bondholders are the residual claimants of corporations' cash flows. d. Average dividend payout ratio of U.S. companies has been increasing over time. e. Stock splits reduce corporations' market capitalization.
Which of the following statements regarding the home mortgage interest expense deduction is correct? A. The...
Which of the following statements regarding the home mortgage interest expense deduction is correct? A. The limit on acquisition indebtedness depends on filing staus. B. Taxpayers who do not itemize deductions can still deduct home mortage interest as a from AGI deduction. C. The limit on acquisition indebtedness applies only in the year of aquisition. D. The limit on acquisition indebtedness applies to one (not multiple) loans.
Which of the following statements regarding a Grantor Retained Annuity Trust is/are true? Pick all that...
Which of the following statements regarding a Grantor Retained Annuity Trust is/are true? Pick all that apply and explain. I. If the grantor survives the trust term, none of the trust assets are included in the grantor's gross estate II. Interest and dividends earned by assets in a GRAT are taxed to the grantor (test answer) III. If the grantor dies during the trust term, a pro rata share of the trust assets will be included in the grantor's estate...
Which of the following statements regarding risk is(are) CORRECT? I. Interest rate risk is the variability...
Which of the following statements regarding risk is(are) CORRECT? I. Interest rate risk is the variability of a security’s returns resulting from changes in interest rates. II. Inflation risk, or purchasing power risk, is the variability of security returns caused by the decline in the purchasing power of invested dollars. I only II only Both I and II Neither I nor II
Which answer is TRUE regarding bond prices and interest rates? Bond prices and interest rates move...
Which answer is TRUE regarding bond prices and interest rates? Bond prices and interest rates move in opposite directions. Interest rate risk is the risk that a company will default on its interest payments. The prices of short-term bonds display greater price sensitivity to interest rate changes than do the prices of long-term bonds. The price of a bond is the future value of the coupon payment and the face value.
Which of the following statements regarding bond prices and market interest rates are most likely to...
Which of the following statements regarding bond prices and market interest rates are most likely to be true? 1. Interest rate risk can be described as the changes in market interest rates that will cause fluctuations in a bond’s price. 2. Bond prices and market interest rates are negatively related to each other. 3. Coupon paying bonds will trade at a premium to their face value because of the future cash flows expected by bond investors.
1. Which of the following statements regarding income is correct? Group of answer choices a. All...
1. Which of the following statements regarding income is correct? Group of answer choices a. All increases in net assets are income b. All income increases assets c. All increases in assets are income d. All increases in equity are income e. All income increases equity 2. Which of the following would be considered a breach of the qualitative characteristic of relevance? Group of answer choices a. Omitting details about very complex financial instruments because only a few users would...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT