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Chapter-05-Sample - FINC 3700 Markets and Institutions...

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FINC 3700 Markets and Institutions Summer 2010 Thommesen Chapter 05 Sample Test Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A steep upward sloping yield curve indicates that short-term interest rates are expected to A) neither rise nor fall, but that long-term rates are expected to rise moderately. B) rise moderately in the near future. C) remain relatively unchanged, but that long-term rates are expected to fall. D) neither rise nor fall in the near future. 2) If the yield curve slope is flat, the liquidity premium theory indicates that the market is predicting 3) If income tax rates rise, then 4) (I) If a corporate bond becomes less liquid, the demand for the bond will fall, causing the interest rate to rise. (II) If a corporate bond becomes less liquid, the demand for Treasury bonds does not change. 5) If municipal bonds were to lose their tax-free status, then the demand for Treasury bonds would shift _________, and the interest rate on Treasury bonds would _________ A) rightward; fall. B) leftward; rise. C) leftward; fall. D) rightward; rise.
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