投资学第7版Test Bank答案.docx

投资学第7版Test Bank答案.docx

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投资学第7版TestBank答案

MultipleChoiceQuestions

1.Thetermstructureofinterestratesis:

A）Therelationshipbetweentheratesofinterestonallsecurities.

B）Therelationshipbetweentheinterestrateonasecurityanditstimetomaturity.

C）Therelationshipbetweentheyieldonabondanditsdefaultrate.

D）Alloftheabove.

E）Noneoftheabove.

Answer:

BDifficulty:

Easy

Rationale:

Thetermstructureofinterestratesistherelationshipbetweentwovariables,yearsandyieldtomaturity（holdingallelseconstant）.

2.Theyieldcurveshowsatanypointintime:

A）Therelationshipbetweentheyieldonabondandthedurationofthebond.

B）Therelationshipbetweenthecouponrateonabondandtimetomaturityofthebond.

C）Therelationshipbetweenyieldonabondandthetimetomaturityonthebond.

D）Alloftheabove.

E）Noneoftheabove.

Answer:

CDifficulty:

Easy

3.Aninvertedyieldcurveimpliesthat:

A）Long-terminterestratesarelowerthanshort-terminterestrates.

B）Long-terminterestratesarehigherthanshort-terminterestrates.

C）Long-terminterestratesarethesameasshort-terminterestrates.

D）Intermediateterminterestratesarehigherthaneithershort-orlong-terminterestrates.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theinverted,ordownwardsloping,yieldcurveisoneinwhichshort-termratesarehigherthanlong-termrates.Theinvertedyieldcurvehasbeenobservedfrequently,althoughnotasfrequentlyastheupwardsloping,ornormal,yieldcurve.

4.Anupwardslopingyieldcurveisa（n）_______yieldcurve.

A）normal.

B）humped.

C）inverted.

D）flat.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theupwardslopingyieldcurveisreferredtoasthenormalyieldcurve,probablybecause,historically,theupwardslopingyieldcurveistheshapethathasbeenobservedmostfrequently.

5.Accordingtotheexpectationshypothesis,anormalyieldcurveimpliesthat

A）interestratesareexpectedtoremainstableinthefuture.

B）interestratesareexpectedtodeclineinthefuture.

C）interestratesareexpectedtoincreaseinthefuture.

D）interestratesareexpectedtodeclinefirst,thenincrease.

E）interestratesareexpectedtoincreasefirst,thendecrease.

Answer:

CDifficulty:

Easy

Rationale:

Anupwardslopingyieldcurveisbasedontheexpectationthatshort-terminterestrateswillincrease.

6.Whichofthefollowingisnotproposedasanexplanationforthetermstructureofinterestrates

A）Theexpectationstheory.

B）Theliquiditypreferencetheory.

C）Themarketsegmentationtheory.

D）Modernportfoliotheory.

E）A,B,andC.

Answer:

DDifficulty:

Easy

Rationale:

A,B,andCarealltheoriesthathavebeenproposedtoexplainthetermstructure.

7.Theexpectationstheoryofthetermstructureofinterestratesstatesthat

A）forwardratesaredeterminedbyinvestors'expectationsoffutureinterestrates.

B）forwardratesexceedtheexpectedfutureinterestrates.

C）yieldsonlong-andshort-maturitybondsaredeterminedbythesupplyanddemandforthesecurities.

D）alloftheabove.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theforwardrateequalsthemarketconsensusexpectationoffutureshortinterestrates.

8.Whichofthefollowingtheoriesstatethattheshapeoftheyieldcurveisessentiallydeterminedbythesupplyanddemandsforlong-andshort-maturitybonds

A）Liquiditypreferencetheory.

B）Expectationstheory.

C）Marketsegmentationtheory.

D）Alloftheabove.

E）Noneoftheabove.

Answer:

CDifficulty:

Easy

Rationale:

Marketsegmentationtheorystatesthatthemarketsfordifferentmaturitiesareseparatemarkets,andthatinterestratesatthedifferentmaturitiesaredeterminedbytheintersectionoftherespectivesupplyanddemandcurves.

9.Accordingtothe"liquiditypreference"theoryofthetermstructureofinterestrates,theyieldcurveusuallyshouldbe:

A）inverted.

B）normal.

C）upwardsloping

D）AandB.

E）BandC.

Answer:

EDifficulty:

Easy

Rationale:

Accordingtotheliquiditypreferencetheory,investorswouldprefertobeliquidratherthanilliquid.Inordertoacceptamoreilliquidinvestment,investorsrequirealiquiditypremiumandthenormal,orupwardsloping,yieldcurveresults.

Usethefollowingtoanswerquestions10-13:

Supposethatallinvestorsexpectthatinterestratesforthe4yearswillbeasfollows:

10.Whatisthepriceof3-yearzerocouponbondwithaparvalueof$1,000

A）$

B）$

C）$

D）$

E）noneoftheabove

Answer:

BDifficulty:

Moderate

Rationale:

$1,000/=$

11.Ifyouhavejustpurchaseda4-yearzerocouponbond,whatwouldbetheexpectedrateofreturnonyourinvestmentinthefirstyeariftheimpliedforwardratesstaythesame（Parvalueofthebond=$1,000）

A）5%

B）7%

C）9%

D）10%

E）noneoftheabove

Answer:

ADifficulty:

Moderate

Rationale:

Theforwardinterestrategivenforthefirstyearoftheinvestmentisgivenas5%（seetableabove）.

12.Whatisthepriceofa2-yearmaturitybondwitha10%couponratepaidannually（Parvalue=$1,000）

A）$1,092

B）$1,054

C）$1,000

D）$1,073

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

[]1/2-1=6%;FV=1000,n=2,PMT=100,i=6,PV=$1,

13.Whatistheyieldtomaturityofa3-yearzerocouponbond

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

[]1/3-1=.

Usethefollowingtoanswerquestions14-16:

Thefollowingisalistofpricesforzerocouponbondswithdifferentmaturitiesandparvalueof$1,000.

14.Whatis,accordingtotheexpectationstheory,theexpectedforwardrateinthethirdyear

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

/-1=9%

15.Whatistheyieldtomaturityona3-yearzerocouponbond

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

（1000/1/3-1=%

16.Whatisthepriceofa4-yearmaturitybondwitha12%couponratepaidannually（Parvalue=$1,000）

A）$

B）$1,

C）$1,

D）$1,

E）noneoftheabove

Answer:

DDifficulty:

Difficult

Rationale:

（1000/1/4-1=%;FV=1000,PMT=120,n=4,i=,PV=$1,

17.Themarketsegmentationtheoryofthetermstructureofinterestrates

A）theoreticallycanexplainallshapesofyieldcurves.

B）definitelyholdsinthe"realworld".

C）assumesthatmarketsfordifferentmaturitiesareseparatemarkets.

D）AandB.

E）AandC.

Answer:

EDifficulty:

Easy

Rationale:

Althoughthistheoryisquitetidytheoretically,bothinvestorsandborrowswilldepartfromtheir"preferredmaturityhabitats"ifyieldsonalternativematuritiesareattractiveenough.

18.Anupwardslopingyieldcurve

A）maybeanindicationthatinterestratesareexpectedtoincrease.

B）mayincorporatealiquiditypremium.

C）mayreflecttheconfoundingoftheliquiditypremiumwithinterestrateexpectations.

D）alloftheabove.

E）noneoftheabove.

Answer:

DDifficulty:

Easy

Rationale:

Oneoftheproblemsofthemostcommonlyusedexplanationoftermstructure,theexpectationshypothesis,isthatitisdifficulttoseparateouttheliquiditypremiumfrominterestrateexpectations.

19.The"break-even"interestrateforyearnthatequatesthereturnonann-periodzero-couponbondtothatofann-1-periodzero-couponbondrolledoverintoaone-yearbondinyearnisdefinedas

A）theforwardrate.

B）theshortrate.

C）theyieldtomaturity.

D）thediscountrate.

E）Noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theforwardrateforyearn,fn,isthe"break-even"interestrateforyearnthatequatesthereturnonann-periodzero-couponbondtothatofann-1-periodzero-couponbondrolledoverintoaone-yearbondinyearn.

20.Whencomputingyieldtomaturity,theimplicitreinvestmentassumptionisthattheinterestpaymentsarereinvestedatthe:

A）Couponrate.

B）Currentyield.

C）Yieldtomaturityatthetimeoftheinvestment.

D）Prevailingyieldtomaturityatthetimeinterestpaymentsarereceived.

E）Theaverageyieldtomaturitythroughouttheinvestmentperiod.

Answer:

CDifficulty:

Moderate

Rationale:

Inordertoearntheyieldtomaturityquotedatthetimeoftheinvestment,couponsmustbereinvestedatthatrate.

21.Whichoneofthefollowingstatementsistrue

A）Theexpectationshypothesisindicatesaflatyieldcurveifanticipatedfutureshort-termratesexceedthecurrentshort-termrate.

B）Thebasicconclusionoftheexpectationshypothesisisthatthelong-termrateisequaltotheanticipatedlong-termrate.

C）Theliquiditypreferencehypothesisindicatesthat,allotherthingsbeingequal,longermaturitieswillhaveloweryields.

D）Thesegmentationhypothesiscontendsthatborrowsandlendersareconstrainedtoparticularsegmentsoftheyieldcurve.

E）Noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

Aflatyieldcurveindicatesexpectationsofexistingrates.Expectationshypothesisstatesthattheforwardrateequalsthemarketconsensusofexpectationsoffutureshortinterestrates.ThereverseofCistrue.

22.Theconceptsofspotandforwardratesaremostcloselyassociatedwithwhichoneofthefollowingexplanationsofthetermstructureofinterestrates.

A）SegmentedMarkettheory

B）ExpectationsHypothesis

C）PreferredHabitatHypothesis

D）LiquidityPremiumtheory

E）Noneoftheabove

Answer:

BDifficulty:

Moderat