F108/FIN1202 Section 03 Financial Markets and Institutions - week 2 quiz

1. The relationship between interest rates and the term to maturity of a security is called the ______________.

 

The risk that a security can be sold at a predictable price with low transaction cost on short notice is known as __________________.

 

The term structure of interest rates is upward sloping for all bond types. A certain AAA rated non-callable 10 year corporate bond has been issued at a 6.15% promised yield. Which one of the following bonds probably has a higher promised yield?

The continual increase in the price level of a basket of goods and services is called __________________.

 

Which one of the following statements is correct?

An investor earned a 5% nominal rate of return over the year. However, over the year prices increased by 2%. The investor's real rate of return was less than their nominal rate of return.

The unbiased expectations hypothesis of the term structure posits that long term interest rates are unrelated to expected future short term rates.

According to the market segmentation theory short term investors will not normally switch to intermediate or long term investments.

Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding.

Ceteris paribus, an increase in the marginal tax rates for all U.S. taxpayers would probably result in reduced supply of funds by households.