投資學(xué)第7版TestBank答案解析15

1、Multiple Choice QuestionsThe term structure of interest rates is:The relationship between the rates of interest on all securities.The relationship between the interest rate on a security and its time to maturity.The relationship between the yield on a bond and its default rate.All of the above.None

2、of the above.Answer: B Difficulty: EasyRationale: The term structure of interest rates is the relationship between two variables, years and yield to maturity (holding all else constant).The yield curve shows at any point in time:The relationship between the yield on a bond and the duration of the bo

3、nd.The relationship between the coupon rate on a bond and time to maturity of the bond.The relationship between yield on a bond and the time to maturity on the bond.All of the above.None of the above.Answer: C Difficulty: EasyAninverted yield curve impliesthat:Long-terminterestratesarelower thanshor

4、t-terminterestrates.Long-terminterestratesarehigher thanshort-terminterestrates.Long-terminterestratesarethe same asshort-terminterestrates.Intermediate term interest rates are higher than either short- or long-term interest rates.none of the above.Answer: A Difficulty: EasyRationale： The inverted,

5、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 the upward sloping, or normal, yield curve.An upward sloping yield curve is a(n) yield curve.normal.humped.inverted.

6、flat.none of the above.Answer: A Difficulty: EasyRationale: The upward sloping yield curve is referred to as the normal yield curve, probably because, historically, the upward sloping yield curve is the shape that has been observed most frequently.5.According to thatthe expectations hypothesis, a no

7、rmal yield curve impliesA) interestB) interestC) interestrates arerates arerates areinterest rates areinterest rates areexpected to remain stable in the future.expected to decline in the future.expected to increase in the future.expected to decline first, then increase.expected to increase first, th

8、en decrease.Answer: C Difficulty: EasyRationale: An upward sloping yield curve is based on the expectation that short-term interest rates will increase.Which of the following is not proposed as an explanation for the term structure of interest rates?The expectations theory.The liquidity preference t

9、heory.The market segmentation theory.Modern portfolio theory.A, B, and C.Answer: D Difficulty: EasyRationale: A, B, and C are all theories that have been proposed to explain the term structure.The expectations theory of the term structure of interest rates states thatforward rates are determined by

10、investors expectations of future interest rates.forward rates exceed the expected future interest rates.yields on long- and short-maturity bonds are determined by the supply and demand for the securities.all of the above.none of the above.Answer: A Difficulty: EasyRationale: The forward rate equals

11、the market consensus expectation of future short interest rates.Which of the following theories state that the shape of the yield curve is essentially determined by the supply and demands for long-and short-maturity bonds?Liquidity preference theory.Expectations theory.Market segmentation theory.All

12、 of the above.None of the above.Answer: C Difficulty: EasyRationale: 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.Acc

13、ording to the liquidity preference theory of the term structure of interest rates, the yield curve usually should be: A) inverted.normal.upward slopingA and B.B and C.Answer: E Difficulty: EasyRationale: According to the liquidity preference theory, investors would prefer to be liquid rather than il

14、liquid. In order to accept a more 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:Year0123Furward Int

15、er est Rate (today)5% 7% 9% 10%What is the price of 3-year zero coupon bond with a par value of $1, 000?$863. 83$816.58$772. 18$765.55none of the aboveAnswer: B Difficulty: ModerateRationale: SI, 000 / (1.05) (1.07) (1.09)= S816. 58If you have just purchased a 4-year zero coupon bond, what would be

16、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 = SI, 000) A) 5% B) 7% C) 9% D) 10%E) none of the aboveAnswer: A Difficulty: ModerateRationale: The forward interest rate given for the first year of the investment is

17、given as 5% (see table above).What is the price of a 2-year maturity bond with a 10% coupon rate paidannually?(Par value = SI,000)A) B) c) D) E)$1,092$1,054 $1, 000the above51,073 none ofAnswer: D Difficulty: ModerateRationale: (1. 05) (1. 07)12 - 1 = 6%; FV = 1000, n = 2, PMT = 100, i = 6,PV = SI,

18、073. 34What is the yield to maturity of a 3-year zero coupon bond?7. 00%9. 00%6. 99%7. 49%none of the aboveAnswer: C Difficulty: ModerateRationale: (1.05) (1.07) (1.09)13 - 1 = 6. 99.Use the following to answer questions 14T6：The following is a list of prices for zero coupon bonds with different mat

19、urities and par value of SI,000.Maturity (Years) Pmu15941402$881,683$808,8845742,09What is, according to the expectations theory, the expected forward rate in the third year?7. 00%7. 33%9. 00%11. 19%none of the aboveAnswer: C Difficulty: ModerateRationale: 881.68 / 808.88 -1=9%What is the yield to m

20、aturity on a 3-year zero coupon bond?6. 37%9. 00%7. 33%10. 00%none of the aboveAnswer: C Difficulty: ModerateRationale: (1000 / 808.81)13 -1 = 7. 33%What is the price of a 4-year maturity bond with a 12% coupon rate paid annually? (Par value = SI,000)$742. 09$1,222.09C) $1,000. 00D) $1, 141.92none o

21、f the aboveAnswer: D Difficulty: DifficultRationale: (1000 / 742. 09)1/4 -1 = 7. 74%; FV = 1000, PMT = 120, n = 4, i =7. 74, PV = SI, 141.92The market segmentation theory of the term structure of interest ratestheoretically can explain all shapes of yield curves.definitely holds in the real world”.a

22、ssumes that markets for different maturities are separate markets.A and B.A and C.Answer: E Difficulty: EasyRationale: Although this theory is quite tidy theoretically, both investors and borrows will depart from their ,preferred maturity habitats” if yields on alternative maturities are attractive

23、enough.An upward sloping yield curvemay 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 above.none of the above.Answer: D Difficulty: EasyRationale: One o

24、f 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 interest rate expectations.The break-even“ interest rate for year n that equates the return on an /7-period zero-coupon bond to that

25、 of an n-J-period zero-coupon bond rolled over into a one-year bond in year n is defined as A) the forward rate.the short rate.the yield to maturity.the discount rate.None of the above.Answer: A Difficulty: EasyRationale: The forward rate for year n, fn, is the break-even, interest rate for year n t

26、hat equates the return on an n-period zero- coupon bond to that of an nT-period zero-coupon bond rolled over into a one-year bond in year n.When computing yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the: A) Coupon rate.Current yield.Yield t

27、o maturity at the time of the investment.Prevailing yield to maturity at the time interest payments are received.The average yield to maturity throughout the investment period.Answer: C Difficulty: ModerateRationale: In order to earn the yield to maturity quoted at the time of the investment, coupon

28、s must be reinvested at that rate.Which one of the following statements is true?The expectations hypothesis indicates a flat yield curve if anticipated future short-term rates exceed the current short-term rate.The basic conclusion of the expectations hypothesis is that the long-term rate is equal t

29、o the anticipated long-term rate.The liquidity preference hypothesis indicates that, all other things being equal, longer maturities will have lower yields.The segmentation hypothesis contends that borrows and lenders are constrained to particular segments of the yield curve.None of the above.Answer

30、: D Difficulty: ModerateRationale: A flat yield curve indicates expectations of existing rates. Expectations hypothesis states that the forward rate equals the market consensus of expectations of future short interest rates. The reverse of C is true.The concepts of spot and forward rates are most cl

31、osely associated with which one of the following explanations of the term structure of interest rates.Segmented Market theoryExpectations HypothesisPreferred Habitat HypothesisLiquidity Premium theoryNone of the aboveAnswer: B Difficulty: ModerateRationale: Only the expectations hypothesis is based

32、on spot and forward rates. A and C assume separate markets for different maturities; liquidity premium assumes higher yields for longer maturities.Use the following to answer question 23:Par ValueTime to MaturityCouponCurrent PriceYield to Maturity$1,00020 years10% (paid annually)$85012%Given the bo

33、nd described above, if interest were paid semi-annually (rather than annually), and the bond continued to be priced at $850, the resulting effective annual yield to maturity would be:Less than 12%More than 12%12%Cannot be determinedNone of the aboveAnswer: B Difficulty: ModerateRationale： FV = 1000,

34、 PV =-850, PMT = 50, n = 40, i = 5. 9964 (semi-annual); (1.059964)2 - 1 = 12. 35%.Interest rates might declinebecause real interest rates are expected to decline.because the inflation rate is expected to decline.because nominal interest rates are expected to increase.A and B.B and C.Answer: D Diffic

35、ulty: EasyRationale: The nominal rate is comprised of the real interest rate plus the expected inflation rate.Forward rates future short rates because .are equal to; they are both extracted from yields to maturity.are equal to; they are perfect forecasts.differ from; they are imperfect forecasts.dif

36、fer from; forward rates are estimated from dealer quotes while future short rates are extracted from yields to maturity.are equal to; although they are estimated from different sources they both are used by traders to make purchase decisions.Answer: C Difficulty: EasyRationale: Forward rates are the

37、 estimates of future short rates extracted from yields to maturity but they are not perfect forecasts because the future cannot be predicted with certainty; therefore they will usually differ.The pure yield curve can be estimatedby using zero-coupon bonds.by using coupon bonds if each coupon is trea

38、ted as a separate zero. C) by using corporate bonds with different risk ratings.by estimating liquidity premiums for different maturities.A and B.Answer: E Difficulty: ModerateRationale: The pure yield curve is calculated using zero coupon bonds, but coupon bonds may be used if each coupon is treate

39、d as a separate zero. The on the run yield curve isa plot of yield as a function of maturity for zero-coupon bonds.a plot of yield as a function of maturity for recently issued coupon bonds trading at or near par.a plot of yield as a function of maturity for corporate bonds with different risk ratin

40、gs.a plot of liquidity premiums for different maturities.A and B.Answer: B Difficulty: ModerateThe market segmentation and preferred habitat theories of term structure A) are identical.vary in that market segmentation is rarely accepted today.vary in that market segmentation maintains that borrowers

41、 and lenders will not depart from their preferred maturities and preferred habitat maintains that market participants will depart from preferred maturities if yields on other maturities are attractive enough.A and B.B and C.Answer: E Difficulty: ModerateRationale: Borrowers and lenders will depart f

42、rom their preferred maturity habitats if yields are attractive enough; thus, the market segmentation hypothesis is no longer readily accepted.The yield curveis a graphical depiction of term structure of interest rates.is usually depicted for U. S. Treasuries in order to hold risk constant across mat

43、urities and yields.is usually depicted for corporate bonds of different ratings.A and B.A and C.Answer: D Difficulty: EasyRationale: The yield curve (yields vs. maturities, all else equal) is depicted for U. S. Treasuries more frequently than for corporate bonds, as the risk is constant across matur

44、ities for Treasuries.Use the following to answer questions 30-32:Year 1Fumiard RateT51%26.4%37.1%47.3%574%30.A) B) c) D) E)What should the purchase price of a 2-year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of SI, 000?$877. 54$888. 33$883. 32$893. 36$871.8

45、0Answer: A Difficulty: DifficultRationale: SI, 000 / (1.064) (1.071)= S877. 54What would the yield to maturity be on a four-year zero coupon bond purchased today?5. 80%7. 30%6. 65%7. 25%none of the above.Answer: C Difficulty: ModerateRationale: (1.058) (1.064) (1.071) (1.073)1/4 - 1 = 6.65%Calculate

46、 the price at the beginning of year 1 of a 10% annual coupon bond with face value SI,000 and 5 years to maturity.$1, 105$1, 132$1, 179$1, 150$1, 119Answer: B Difficulty: DifficultRationale: i = (1.058) (1. 064) (1.071) (1.073) (1.074)1/5 - 1 = 6.8%; FV =1000, PMT = 100, n = 5, i = 6. 8, PV = SI, 131

47、.91Given the yield on a 3 year zero-coupon bond is 7. 2% and forward rates of 6. 1% in year 1 and 6. 9% in year 2, what must be the forward rate in year 3?8.4%8. 6%8. 1%8. 9%none of the above.Answer: B Difficulty: ModerateRationale: f3 =(1.072)3 / (1.061) (1.069) - 1 = 8. 6%An inverted yield curve i

48、s onewith a hump in the middle.constructed by using convertible bonds.that is relatively flat.that plots the inverse relationship between bond prices and bond yields.that slopes downward.Answer: E Difficulty: EasyRationale: An inverted yield curve occurs when short-term rates are higher than long-te

49、rm rates.Investors can use publicly available financial date to determine which of the following?the shape of the yield curve) future short-term ratesI) the direction the Dow indexes are heading) the actions to be taken by the Federal Reserve TOC o 1-5 h z IandIIIandIIII,II,andIIII, III, and IVI,II,

50、III,and IVAnswer: A Difficulty: ModerateRationale: Only the shape of the yield curve and future inferred rates can be determined. The movement of the Dow Indexes and Federal Reserve policy are influenced by term structure but are determined by many other variables also.Which of the following combina

51、tions will result in a sharply increasingyield curve?A)B)C)increasingdecreasingincreasingexpected shortexpected shortexpected shortrates andrates andrates andincreasing increasing decreasingliquidity premiumsliquidity premiumsliquidity premiumsD)increasing expected shortrates and constant liquidity

52、premiumsE) constant expected short rates and increasing liquidity premiumsAnswer: A Difficulty: ModerateRationale: Both of the forces will act to increase the slope of the yield curve.The yield curve is a component ofthe Dow Jones Industrial Average.the consumer price index.the index of leading econ

53、omic indicators.the producer price index.the inflation index.Answer: C Difficulty: EasyRationale: Since the yield curve is often used to forecast the business cycle, it is used as one of the leading economic indicators.The most recently issued Treasury securities are calledon the run.off the run.on

54、the market.off the market.none of the above.Answer: A Difficulty: EasyUse the following to answer questions 39-42：Suppose that all investors expect that interest rates for the 4 years will be as follows:Year12Forward Interest Rate黑5%6%3What is the price of 3-year zero coupon bond with a par value of

55、 $1, 000? A) $889. 08$816.58$772. 18$765.55none of the aboveAnswer: A Difficulty: ModerateRationale: SI, 000 / (1.03) (1.04) (1.05)= S889. 08If 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 rat

56、es stay the same? (Par value of the bond = SI, 000) A) 5% B) 3% C) 9% D) 10%E) none of the aboveAnswer: B Difficulty: ModerateRationale: The forward interest rate given for the first year of the investment is given as 3% (see table above).What is the price of a 2-year maturity bond with a 5% coupon

57、rate paid annually? (Par value = SI,000) A) $1,092. 97 B) $1,054.24C) $1,028.51$1,073. 34none of the aboveAnswer: C Difficulty: ModerateRationale: (1.03) (1.04)I1 - 1 = 3. 5%; FV = 1000, n = 2, PMT = 50, i = 3. 5, PV = SI, 028. 51A)B)C)D)What is the yield to maturity of a 3-year zero coupon bond?7.

58、00%9. 00%6. 99%4%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.03) (1.04) (1.05)13 -1 = 4%.Use the following to answer questions 43-46：The following is a list of prices for zero coupon bonds with different maturities and par value of SI,000.Maturity (Years Pnce1$925,162$862.573$788

59、.664$711.00What is, according to the expectations theory, the expected forward rate in the third year?7. 239. 37%9. 00%10. 9%none of the aboveAnswer: B Difficulty: ModerateRationale: 862.57 / 788.66 - 1 = 9. 37%What is the yield to maturity on a 3-year zero coupon bond?6. 37%9. 00%7. 33%8. 24%none o

60、f the aboveAnswer: D Difficulty: Moderate Rationale: (1000 / 788. 66)1/3 -1 = 8. 24%What is the price of a 4-year maturity bond with a 10% coupon rate paid annually? (Par value = SI,000) A) $742.09$1,222. 09$1,035. 66$1, 141.84none of the aboveAnswer: C Difficulty: DifficultRationale: (1000 / 711. 0