投资学第7版Test Bank答案.docx

1、投资学第7版Test Bank答案Multiple Choice Questions 1. The term structure of interest rates is: A) The relationship between the rates of interest on all securities. B) The relationship between the interest rate on a security and its time to maturity. C) The relationship between the yield on a bond and its de

2、fault rate. D) All of the above. E) None of the above. Answer: B Difficulty: Easy Rationale: The term structure of interest rates is the relationship between two variables, years and yield to maturity (holding all else constant). 2. The yield curve shows at any point in time: A) The relationship bet

3、ween the yield on a bond and the duration of the bond. B) The relationship between the coupon rate on a bond and time to maturity of the bond. C) The relationship between yield on a bond and the time to maturity on the bond. D) All of the above. E) None of the above. Answer: C Difficulty: Easy 3. An

4、 inverted yield curve implies that: A) Long-term interest rates are lower than short-term interest rates. B) Long-term interest rates are higher than short-term interest rates. C) Long-term interest rates are the same as short-term interest rates. D) Intermediate term interest rates are higher than

5、either short- or long-term interest rates. E) none of the above. Answer: A Difficulty: Easy Rationale: The inverted, or downward sloping, yield curve is one in which short-term rates are higher than long-term rates. The inverted yield curve has been observed frequently, although not as frequently as

6、 the upward sloping, or normal, yield curve. 4. An upward sloping yield curve is a(n) _ yield curve. A) normal. B) humped. C) inverted. D) flat. E) none of the above. Answer: A Difficulty: Easy Rationale: The upward sloping yield curve is referred to as the normal yield curve, probably because, hist

7、orically, the upward sloping yield curve is the shape that has been observed most frequently. 5. According to the expectations hypothesis, a normal yield curve implies that A) interest rates are expected to remain stable in the future. B) interest rates are expected to decline in the future. C) inte

8、rest rates are expected to increase in the future. D) interest rates are expected to decline first, then increase. E) interest rates are expected to increase first, then decrease. Answer: C Difficulty: Easy Rationale: An upward sloping yield curve is based on the expectation that short-term interest

9、 rates will increase. 6. Which of the following is not proposed as an explanation for the term structure of interest rates A) The expectations theory. B) The liquidity preference theory. C) The market segmentation theory. D) Modern portfolio theory. E) A, B, and C. Answer: D Difficulty: Easy Rationa

10、le: A, B, and C are all theories that have been proposed to explain the term structure. 7. The expectations theory of the term structure of interest rates states that A) forward rates are determined by investors expectations of future interest rates. B) forward rates exceed the expected future inter

11、est rates. C) yields on long- and short-maturity bonds are determined by the supply and demand for the securities. D) all of the above. E) none of the above. Answer: A Difficulty: Easy Rationale: The forward rate equals the market consensus expectation of future short interest rates. 8. Which of the

12、 following theories state that the shape of the yield curve is essentially determined by the supply and demands for long-and short-maturity bonds A) Liquidity preference theory. B) Expectations theory. C) Market segmentation theory. D) All of the above. E) None of the above. Answer: C Difficulty: Ea

13、sy Rationale: Market segmentation theory states that the markets for different maturities are separate markets, and that interest rates at the different maturities are determined by the intersection of the respective supply and demand curves. 9. According to the liquidity preference theory of the te

14、rm structure of interest rates, the yield curve usually should be: A) inverted. B) normal. C) upward sloping D) A and B. E) B and C. Answer: E Difficulty: Easy Rationale: According to the liquidity preference theory, investors would prefer to be liquid rather than illiquid. In order to accept a more

15、 illiquid investment, investors require a liquidity premium and the normal, or upward sloping, yield curve results.Use the following to answer questions 10-13:Suppose that all investors expect that interest rates for the 4 years will be as follows: 10. What is the price of 3-year zero coupon bond wi

16、th a par value of $1,000 A) $ B) $ C) $ D) $ E) none of the above Answer: B Difficulty: Moderate Rationale: $1,000 / = $ 11. If you have just purchased a 4-year zero coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same

17、 (Par value of the bond = $1,000) A) 5% B) 7% C) 9% D) 10% E) none of the above Answer: A Difficulty: Moderate Rationale: The forward interest rate given for the first year of the investment is given as 5% (see table above). 12. What is the price of a 2-year maturity bond with a 10% coupon rate paid

18、 annually (Par value = $1,000) A) $1,092 B) $1,054 C) $1,000 D) $1,073 E) none of the above Answer: D Difficulty: Moderate Rationale: 1/2 - 1 = 6%; FV = 1000, n = 2, PMT = 100, i = 6, PV = $1, 13. What is the yield to maturity of a 3-year zero coupon bond A) % B) % C) % D) % E) none of the above Ans

19、wer: C Difficulty: Moderate Rationale: 1/3 - 1 = .Use the following to answer questions 14-16:The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000. 14. What is, according to the expectations theory, the expected forward rate in the third year A) %

20、 B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: / - 1 = 9% 15. What is the yield to maturity on a 3-year zero coupon bond A) % B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: (1000 / 1/3 -1 = % 16. What is the price of a 4-year maturity bo

21、nd with a 12% coupon rate paid annually (Par value = $1,000) A) $ B) $1, C) $1, D) $1, E) none of the above Answer: D Difficulty: Difficult Rationale: (1000 / 1/4 -1 = %; FV = 1000, PMT = 120, n = 4, i = , PV = $1, 17. The market segmentation theory of the term structure of interest rates A) theoret

22、ically can explain all shapes of yield curves. B) definitely holds in the real world. C) assumes that markets for different maturities are separate markets. D) A and B. E) A and C. Answer: E Difficulty: Easy Rationale: Although this theory is quite tidy theoretically, both investors and borrows will

23、 depart from their preferred maturity habitats if yields on alternative maturities are attractive enough. 18. An upward sloping yield curve A) may be an indication that interest rates are expected to increase. B) may incorporate a liquidity premium. C) may reflect the confounding of the liquidity pr

24、emium with interest rate expectations. D) all of the above. E) none of the above. Answer: D Difficulty: Easy Rationale: One of the problems of the most commonly used explanation of term structure, the expectations hypothesis, is that it is difficult to separate out the liquidity premium from interes

25、t rate expectations. 19. The break-even interest rate for year n that equates the return on an n-period zero-coupon bond to that of an n-1-period zero-coupon bond rolled over into a one-year bond in year n is defined as A) the forward rate. B) the short rate. C) the yield to maturity. D) the discoun

26、t rate. E) None of the above. Answer: A Difficulty: Easy Rationale: The forward rate for year n, fn, is the break-even interest rate for year n that equates the return on an n-period zero- coupon bond to that of an n-1-period zero-coupon bond rolled over into a one-year bond in year n. 20. When comp

27、uting yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the: A) Coupon rate. B) Current yield. C) Yield to maturity at the time of the investment. D) Prevailing yield to maturity at the time interest payments are received. E) The average yield to

28、 maturity throughout the investment period. Answer: C Difficulty: Moderate Rationale: In order to earn the yield to maturity quoted at the time of the investment, coupons must be reinvested at that rate. 21. Which one of the following statements is true A) The expectations hypothesis indicates a fla

29、t yield curve if anticipated future short-term rates exceed the current short-term rate. B) The basic conclusion of the expectations hypothesis is that the long-term rate is equal to the anticipated long-term rate. C) The liquidity preference hypothesis indicates that, all other things being equal,

30、longer maturities will have lower yields. D) The segmentation hypothesis contends that borrows and lenders are constrained to particular segments of the yield curve. E) None of the above. Answer: D Difficulty: Moderate Rationale: A flat yield curve indicates expectations of existing rates. Expectati

31、ons hypothesis states that the forward rate equals the market consensus of expectations of future short interest rates. The reverse of C is true. 22. The concepts of spot and forward rates are most closely associated with which one of the following explanations of the term structure of interest rates. A) Segmented Market theory B) Expectations Hypothesis C) Preferred Habitat Hypothesis D) Liquidity Premium theory E) None of the above Answer: B Difficulty: Moderat