Most of the time the interest rate on treasury notes

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28) Most of the time, the interest rate on Treasury notes and bonds is A) above that on money market securities because of interest rate risk. B) above that on money market securities because of default risk. C) below that on money market securities because of interest rate risk. D) below that on money market securities because of default risk. Answer: A 29) (I) In most years the rate of return on short-term Treasury bills is below that on the 20-year Treasury bond. (II) Interest rates on Treasury bills are more volatile than rates on long-term Treasury securities. 30) (I) Because interest rates on Treasury bills are more volatile than rates on long-term securities, the return on short-term Treasury securities is usually above that on longer-term Treasury securities. (II) A STRIP separates the periodic interest payments from the final principal repayment. 31) Which of the following statements about Treasury inflation-indexed bonds is not true? 32) The interest rates on government agency bonds are A) are almost identical to those available on Treasury securities since it is unlikely that the federal government would permit its agencies to default on their obligations. B) are significantly higher than those available on Treasury securities due to their low liquidity. C) are significantly lower than those available on Treasury securities because agency interest payments are tax exempt. D) are significantly lower than those available on Treasury securities because the interest rate risk on agency securities is lower than that on Treasury securities. Answer: B 124
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33) (I) Municipal bonds that are issued to pay for essential public projects are exempt from federal taxation. (II) General obligation bonds do not have specific assets pledged as security or a specific source of revenue allocated for their repayment. 34) (I) Most corporate bonds have a face value of $1000, pay interest semi-annually, and can be redeemed anytime the issuer wishes. (II) Registered bonds have now been largely replaced by bearer bonds, which do not have coupons.
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