Tiền tệ ngân hàng FTU - Trắc nghiệm chương 4

Chapter 6 The Risk and Term Structure of Interest Rates 6.1 Risk Structure of Interest Rates 1) The risk structure of interest rates is A) the structure of how interest rates move over time. B) the relationship among interest rates of different bonds with the same maturity. C) the relationship among the term to maturity of different bonds. D) the relationship among interest rates on bonds with different maturities. Answer: B Ques Status: Previous Edition 2) The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures is A) interest rate risk. B) inflation risk. C) moral hazard. D) default risk. Answer: D Ques Status: Previous Edition 3) Bonds with no default risk are called A) flower bonds. B) no-risk bonds. C) default-free bonds. D) zero-risk bonds. Answer: C Ques Status: Previous Edition 4) Which of the following bonds are considered to be default-risk free? A) Municipal bonds B) Investment-grade bonds C) U.S. Treasury bonds D) Junk bonds Answer: C Ques Status: Previous Edition 5) U.S. government bonds have no default risk because A) they are backed by the full faith and credit of the federal government. B) the federal government can increase taxes to pay its obligations. C) they are backed with gold reserves. D) they can be exchanged for silver at any time. Answer: B Ques Status: Previous Edition 112 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 6) The spread between the interest rates on bonds with default risk and default-free bonds is called the A) risk premium. B) junk margin. C) bond margin. D) default premium. Answer: A Ques Status: Previous Edition 7) If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will ________ and the expected return on these bonds will ________, everything else held constant. A) decrease; increase B) decrease; decrease C) increase; increase D) increase; decrease Answer: D Ques Status: Previous Edition 8) A bond with default risk will always have a ________ risk premium and an increase in its default risk will ________ the risk premium. A) positive; raise B) positive; lower C) negative; raise D) negative; lower Answer: A Ques Status: Previous Edition 9) If a corporation begins to suffer large losses, then the default risk on the corporate bond will A) increase and the bondʹs return will become more uncertain, meaning the expected return on the corporate bond will fall. B) increase and the bondʹs return will become less uncertain, meaning the expected return on the corporate bond will fall. C) decrease and the bondʹs return will become less uncertain, meaning the expected return on the corporate bond will fall. D) decrease and the bondʹs return will become less uncertain, meaning the expected return on the corporate bond will rise. Answer: A Ques Status: Previous Edition 10) If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will ________, and the bondsʹ returns will become ________ uncertain, meaning that the expected return on these bonds will decrease, everything else held constant. A) increase; less B) increase; more C) decrease; less D) decrease; more Answer: B Ques Status: Previous Edition Chapter 6 The Risk and Term Structure of Interest Rates 113 11) Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________. A) right; right B) right; left C) left; right D) left; left Answer: C Ques Status: Previous Edition 12) An increase in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the price of Treasury bonds, everything else held constant. A) increase; increase B) reduce; reduce C) reduce; increase D) increase; reduce Answer: C Ques Status: Previous Edition 13) An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds and ________ the yield on Treasury securities, everything else held constant. A) increase; increase B) reduce; reduce C) increase; reduce D) reduce; increase Answer: C Ques Status: Previous Edition 14) An increase in default risk on corporate bonds ________ the demand for these bonds, but ________ the demand for default-free bonds, everything else held constant. A) increases; lowers B) lowers; increases C) does not change; greatly increases D) moderately lowers; does not change Answer: B Ques Status: Previous Edition 15) As default risk increases, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant. A) increases; less B) increases; more C) decreases; less D) decreases; more Answer: D Ques Status: Previous Edition 114 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 16) As their relative riskiness ________, the expected return on corporate bonds ________ relative to the expected return on default-free bonds, everything else held constant. A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; does not change Answer: B Ques Status: Previous Edition 17) Which of the following statements are true? A) A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds. B) The expected return on corporate bonds decreases as default risk increases. C) A corporate bondʹs return becomes less uncertain as default risk increases. D) As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds. Answer: B Ques Status: Previous Edition 18) Everything else held constant, if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future, the interest rate on corporate bonds will ________ and the interest rate on Treasury securities will ________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease Answer: C Ques Status: Previous Edition 19) Bonds with relatively high risk of default are called A) Brady bonds. B) junk bonds. C) zero coupon bonds. D) investment grade bonds. Answer: B Ques Status: Previous Edition 20) Bonds with relatively low risk of default are called ________ securities and have a rating of Baa (or BBB) and above; bonds with ratings below Baa (or BBB) have a higher default risk and are called ________. A) investment grade; lower grade B) investment grade; junk bonds C) high quality; lower grade D) high quality; junk bonds Answer: B Ques Status: Previous Edition Chapter 6 The Risk and Term Structure of Interest Rates 115 21) Which of the following bonds would have the highest default risk? A) Municipal bonds B) Investment-grade bonds C) U.S. Treasury bonds D) Junk bonds Answer: D Ques Status: Previous Edition 22) Which of the following long-term bonds has the highest interest rate? A) Corporate Baa bonds B) U.S. Treasury bonds C) Corporate Aaa bonds D) Municipal bonds Answer: A Ques Status: Previous Edition 23) Which of the following securities has the lowest interest rate? A) Junk bonds B) U.S. Treasury bonds C) Investment-grade bonds D) Corporate Baa bonds Answer: B Ques Status: New 24) The spread between interest rates on low quality corporate bonds and U.S. government bonds A) widened significantly during the Great Depression. B) narrowed significantly during the Great Depression. C) narrowed moderately during the Great Depression. D) did not change during the Great Depression. Answer: A Ques Status: Previous Edition 25) During the Great Depression years 1930-1933 there was a very high rate of business failures and defaults, we would expect the risk premium for ________ bonds to be very high. A) U.S. Treasury B) corporate Aaa C) municipal D) corporate Baa Answer: D Ques Status: Previous Edition 26) Risk premiums on corporate bonds tend to ________ during business cycle expansions and ________ during recessions, everything else held constant. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease Answer: C Ques Status: Previous Edition 116 Mishkin · The Economics of Money, Banking, and Financial Markets, 9th Edition 27) The collapse of the subprime mortgage market A) did not affect the corporate bond market. B) increased the perceived riskiness of Treasury securities. C) reduced the Baa-Aaa spread. D) increased the Baa-Aaa spread. Answer: D Ques Status: Revised 28) The collapse of the subprime mortgage market increased the spread between Baa and default-free U.S. Treasury bonds. This is due to A) a reduction in risk. B) a reduction in maturity. C) a flight to quality. D) a flight to liquidity. Answer: C Ques Status: Revised 29) During a ʺflight to qualityʺ A) the spread between Treasury bonds and Baa bonds increases. B) the spread between Treasury bonds and Baa bonds decreases. C) the spread between Treasury bonds and Baa bonds is not affected. D) the change in the spread between Treasury bonds and Baa bonds cannot be predicted. Answer: A Ques Status: Revised 30) If you have a very low tolerance for risk, which of the following bonds would you be least likely to hold in your portfolio? A) a U.S. Treasury bond B) a municipal bond C) a corporate bond with a rating of Aaa D) a corporate bond with a rating of Baa Answer: D Ques Status: Previous Edition 31) Which of the following statements are true? A) A liquid asset is one that can be quickly and cheaply converted into cash. B) The demand for a bond declines when it becomes less liquid, decreasing the interest rate spread between it and relatively more liquid bonds. C) The differences in bond interest rates reflect differences in default risk only. D) The corporate bond market is the most liquid bond market. Answer: A Ques Status: Previous Edition