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Unformatted text preview: have a higher default risk and are called _____. investment grade; junk bonds high quality; lower grade high quality; junk bonds investment grade; lower grade 4. Following the Enron collapse the spread between interest rates on (Baa-rated) and (Aaa-rated) corporate bonds did not change. widened significantly. widened slightly. narrowed. 5. According to the pure expectations theory of the term structure, (a) when the yield curve is steeply upward sloping, short-term interest rates are expected to rise in the future. (b) when the yield curve is downward sloping, short-term interest rates are expected to decline in the future. (c) yield curves should be equally likely to slope downward as to slope upward. (d) all of the above. (e) only (a) and (b) of the above....
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