Flat yield curves imply

short and long term rates are the same

The fact that investors prefer ST bonds that have less interest rate risk than LT bonds explain

why yield curves are upward sloping

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FIMI 1 Week 2

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Chapters 2-3

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Questions 10

Answers

1
Theory stating that investors choose securities with maturities that match their cash needs
liquidity premium theory
preferred habitat theory
segmented markets theory
loanable funds theory
2
Theory that interest on LT bond equals the average of ST interest rates expected by investors
segmented markets theory
preferred habitat theory
liquidity premium theory
expectations theory
3
Government demand for loanable funds are generally
vertical
upward sloping
downward sloping
horizontal
4
Flat yield curves imply
long term rates are above short term rates
long term rates are below short term rates
short and long term rates are the same
long term rates of different maturities are the same
5
Theory stating equilibrium interest rate is determined by aggregate demand and supply of funds
loanable funds theory
expectations theory
segmented markets theory
preferred habitat theory
6
The fact that investors prefer ST bonds that have less interest rate risk than LT bonds explain
why yield curves are upward sloping
why term structure of interest rates changes over time
why interest rates on bonds move together over time
why yield curves are downward sloping
7
Interest rate that equates future cash flow to its present value is called
discount rate
yield
real interest rate
effective annual interest rate
8
Process by which future value of money is expressed at its present value + interest earned
factoring
amortizing
discounting
compounding
9
Which of the following does not affect yields on debt securities
default risk
tax status
term to maturity
expected inflation
10
When a fixed sum of money is saved every period to reach a desired lump sum is called
sinking fund
annuity
amortization payment
perpetuity

FIMI 1 Week 2 Flashcards | StudBud