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1、Financial Markets and Institutions, 7e (Mishkin)Chapter 5 How Do Risk and Term Structure Affect Interest Rates?5.1 Multiple Choice1) The term structure of interest rates isA) the relationship among interest rates of different bonds with the same risk and maturity.B) the structure of how interest rat
2、es move over time.C) the relationship among the terms to maturity of different bonds from different issuers.D) the relationship among interest rates on bonds with different maturities but similar risk.Answer: D2) The risk structure of interest rates isA) the structure of how interest rates move over
3、 time.B) the relationship among interest rates of different bonds with the same maturity.C) the relationship among the terms to maturity of different bonds.D) the relationship among interest rates on bonds with different maturities.Answer: B3) Which of the following long-term bonds should have the l
4、owest interest rate?A) Corporate Baa bondsB) U.S. Treasury bondsC) Corporate Aaa bondsD) Municipal bondsAnswer: D4) Which of the following long-term bonds should have the highest interest rate?A) Corporate Baa bondsB) U.S. Treasury bondsC) Corporate Aaa bondsD) Municipal bondsAnswer: A5) The risk pr
5、emium on corporate bonds becomes smaller ifA) the riskiness of corporate bonds increases.B) the liquidity of corporate bonds increases.C) the liquidity of corporate bonds decreases.D) the riskiness of corporate bonds decreases.E) either B or D of the above occur.Answer: E6) Bonds with relatively low
6、 risk of default are calledA) zero coupon bonds.B) junk bonds.C) investment-grade bonds.D) none of the above.Answer: C7) Bonds with relatively high risk of default are calledA) Brady bonds.B) junk bonds.C) zero coupon bonds.D) investment-grade bonds.Answer: B8) A corporation suffering big losses mig
7、ht be more likely to suspend interest payments on its bonds, therebyA) raising the default risk and causing the demand for its bonds to rise.B) raising the default risk and causing the demand for its bonds to fall.C) lowering the default risk and causing the demand for its bonds to rise.D) lowering
8、the default risk and causing the demand for its bonds to fall.Answer: B9) (I) If a corporation suffers big losses, the demand for its bonds will rise because of the higher interest rates the firm must pay. (II) The spread between the interest rates on bonds with default risk and default-free bonds i
9、s called the risk premium.A) (I) is true, (II) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.Answer: B10) Holding everything else constant, if a corporation begins to suffer large losses, then the default risk on its bonds will _ and the expected return on those bonds will _.A)
10、 increase: increaseB) decrease; increaseC) increase; decreaseD) decrease; decreaseAnswer: C11) Holding everything else the same, if a corporations earnings rise, then the default risk on its bonds will _ and the expected return on those bonds will _.A) increase; decreaseB) decrease; decreaseC) incre
11、ase; increaseD) decrease; increaseAnswer: D12) If a corporation begins to suffer large losses, then the default risk on its bonds will _ and the equilibrium interest rate on these bonds will _.A) increase; decreaseB) decrease; increaseC) increase; increaseD) decrease; decreaseAnswer: C13) If a corpo
12、rations earnings rise, then the default risk on its bonds will _ and the equilibrium interest rate on these bonds will _.A) increase; decreaseB) decrease; decreaseC) increase; increaseD) decrease; increaseAnswer: B14) When the default risk on corporate bonds decreases, other things equal, the demand
13、 curve for corporate bonds shifts to the _ and the demand curve for Treasury bonds shifts to the _.A) right; rightB) right; leftC) left; leftD) left; rightAnswer: B15) (I) An increase in default risk on corporate bonds shifts the demand curve for corporate bonds to the right. (II) An increase in def
14、ault risk on corporate bonds shifts the demand curve for Treasury bonds to the left.A) (I) is true, (II) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.Answer: D16) (I) An increase in default risk on corporate bonds shifts the demand curve for corporate bonds to the left. (II) A
15、n increase in default risk on corporate bonds shifts the demand curve for Treasury bonds to the right.A) (I) is true, (II) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.Answer: C17) The spread between interest rates on low-quality corporate bonds and U.S. government bonds _ during the Great Depression.A) was reversedB) narrowed significantlyC) widened significantlyD) did not changeAnswer: C
