Which one of the following factors does not affect bond yields? Multiple choice question. lack of liquidity capital gains yield expected future inflation tax status
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Which one of the following factors does not affect bond yields?
lack of liquidity
expected future inflation
tax status
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- Which theory of the term structure proposes that bonds of different maturities are not substitutes for one another? a. Market segmentation theory b. Expectations theory c. Separable markets theory O d. Liquidity premium theoryHelpWhen estimating cost of debt, the firm should not simply use current short-term rates because these rates do not reflect expectations regarding Group of answer choices long-term inflation expansionary monetary policy contractionary monetary policy short-term inflation
- An upward-sloping yield curve may be an indication that interest rates are expected to increase. may incorporate a liquidity premium. may reflect the confounding of the liquidity premium with interest rate- expectations. All of the opțions are correct. None of the options are correct.Which of the following is TRUE concerning the distinction between interest rates and returns? Select one: a. The rate of return will be greater than the interest rate when the price of the bond falls during the holding period. b. The return can be expressed as the difference between the current yield and the rate of capital gains. c. The rate of return on a bond will not necessarily equal the interest rate on that bond. d. The return can be expressed as the sum of the discount yield and the rate of capital gains3. Bond prices and yields (S3.1) Construct some simple examples to illustrate your answers to the following:
- With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to priceDuration is important in understanding a fixed income portfolio because A. it is used in the capital asset pricing model B. it measures the interest rate sensitivity of a bonds value C. It measures the correlation with a bank's stock price D. It causes contagionWhy is under-pricing not a great concern with bond offerings?
- The inverted yield curve predicts that bond prices will fall. Select one: True OR FalseWhat happens to Bond prices, quantities, and interest rates if (Make sure to include the supply and demand graph for bonds for each question : a) Decrease in wealth b) Increase in risk c) Decrease in liquidityWhat is the relationship between bond prices and market interest rates? Direct Indirect Unrelated Perfectly correlated Perfectly uncorrelated
