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ECO 316 Version 1 Week 2 Chapter 7 Risk Structure and Term Structure of Interest Rates Quiz
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Download answer at https://www.examtutorials.com/course/eco-316-version-1-week-2-chapter-7-risk-structure-and-term-structure-of-interest-rates-quiz/
Chapter 7 Risk Structure and Term Structure of Interest Rates<h2>15 correct answers</h2>7.1 Multiple Choice Questions1) The risk structure of interest rates refers toA) the amount of additional interest necessary to compensate savers for the greater riskof default on some bonds.B) the relationship among the interest rates on similar bonds with different maturities.C) the relationship among the interest rates on bonds with the same maturity.D) the amount of additional interest necessary to compensate savers for the lesserliquidity of some bonds.2) Default risk arises from the fact thatA) borrowers differ in their ability to repay in full the principal and interest required by aloan agreement.B) the tax treatment of financial instruments differs.C) it is inherently riskier to wait for a capital gain than to receive an immediate interestpayment.D) interest rates are far more likely to go up than to go down.3) If the average risk premium of corporate bonds increases,A) the average price of corporate bonds will also increase.B) it's a indicator of a possible upcoming recession.C) interest rates on those bonds decrease.D) the risk premium on treasury bonds will also increase.4) Currently, a three-month Treasury bill pays 5% interest and a ten-year Treasury bond pays4.7% interest. What is the risk premium of the typical A-rated corporate bond that pays5.5% interest?A) 0.5%B) 0.8%C) 5.5%D) 1.175) Currently, a three-year Treasury note pays 4.75%. Assuming that your tax rate is 20%, whatis the minimum interest rate that you would you need to earn on a tax-free municipal bondin order to buy it instead?A) 0.95%B) 3.8%C) 5.7%D) 15.25% https://www.examtutorials.com/course/eco-316-version-1-week-2-chapter-7-risk-structure-and-term-structure-of-interest-rates-quiz/ |
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