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Investments Study Set 4

Business

Quiz 15 :

The Term Structure of Interest Rates

Quiz 15 :

The Term Structure of Interest Rates

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If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows), you could
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Answer:

A

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Suppose that all investors expect that interest rates for the 4 years will be as follows: img What is the yield to maturity of a 3-year zero-coupon bond?
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Answer:

C

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If the value of a Treasury bond was lower than the value of the sum of its parts (STRIPPED cash flows), you could
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Answer:

D

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Suppose that all investors expect that interest rates for the 4 years will be as follows: img What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Par value = $1,000)
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The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. img According to the expectations theory, what is the expected forward rate in the third year?
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Suppose that all investors expect that interest rates for the 4 years will be as follows: img What is the price of a 3-year zero-coupon bond with a par value of $1,000?
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Suppose that all investors expect that interest rates for the 4 years will be as follows: img 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? (Par value of the bond = $1,000)
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The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. img What is the yield to maturity on a 3-year zero-coupon bond?
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Treasury STRIPS are
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The yield curve shows at any point in time
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If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows),
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Bond stripping and bond reconstitution offer opportunities for ______, which can occur if the _________ is violated.
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An inverted yield curve implies that
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Which of the following are possible explanations for the term structure of interest rates?
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According to the expectations hypothesis, an upward-sloping yield curve implies that
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The expectations theory of the term structure of interest rates states that
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An upward sloping yield curve is a(n) _______ yield curve.
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Structure of interest rates is
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If the value of a Treasury bond was lower than the value of the sum of its parts (STRIPPED cash flows),
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The value of a Treasury bond should
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