HW3_Quest

# HW3_Quest - Homework 3 MC Questions EC 370 Fall 2008 Name...

This preview shows pages 1–2. Sign up to view the full content.

1 Homework 3 MC Questions EC 370 – Fall 2008 Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A plot of the interest rates on default - free government bonds with different terms to maturity is called 1) _______ A) a risk - structure curve. B) a yield curve. C) a default - free curve. D) an interest - rate curve. 2) When yield curves are steeply upward sloping, 2) _______ A) short - term interest rates are about the same as long - term interest rates. B) medium - term interest rates are above both short - term and long - term interest rates. C) short - term interest rates are above long - term interest rates. D) long - term interest rates are above short - term interest rates. 3) If the expected path of one - year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today's interest rate on the five - year bond is 3) _______ A) 4 percent. B) 5 percent. C) 6 percent. D) 7 percent. 4) Over the next three years, the expected path of 1 - year interest rates is 4, 1, and 1 percent. The expectations theory of the term structure predicts that the current interest rate on 3 - year bond is 4) _______ A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent. 5) If the expected path of 1 - year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity of 5) _______ A) one year. B) two years. C) three years. D) four years. 6) According to the segmented markets theory of the term structure 6) _______ A) bonds of one maturity are close substitutes for bonds of other maturities, therefore, interest rates on bonds of different maturities move together over time. B)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 5

HW3_Quest - Homework 3 MC Questions EC 370 Fall 2008 Name...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online