Question

In: Economics

1. A "MOB" is calculated as difference between the yield on municipal bond minus U.S. treasury...

1. A "MOB" is calculated as difference between the yield on municipal bond minus U.S. treasury bond of the same maturity. This spread is an example of a

a. Maturity spread

b. Quality spread

c. Time spread

d. Calendar spread

2. Which of the following debt instruments are considered less risky than U.S. treasuries?

a. Corporate Bonds

b. Municipal Bonds

c. Both of the above

d. None of the above

3. Which of the following is NOT a theory explaining the term structure of the yield curve?

a. theory of random walk

b. liquidity theory

c. market segmentation theory

d. expectations theory

Expert Solution

1. Answer is “Quality spread”

Difference between the yield on municipal bond minus U.S. treasury bond of the same maturity is called Credit or Quality spread

2. Answer is None of the above

No securities or bonds are less risky than US treasuries, there is lowest or nil risk on US government securities

3. Answer is “Theory of random walk”

Other options explains the theory of the term structure of the yield curve.

Rahul Sunny answered 2 years ago

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