Question 191 ptsWhich of the following shocks will decrease the demand for bonds?Select all that apply.The expected return on real estate rises.The volatility of bond returns increases.The expected return on equities falls.Expected inflation decreases.Investor wealth falls.

Option a: This option is correct because if the expected return on real estate increases the demand…

Answered: Question 19 1 pts Which of the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 4QTD

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which one is correct please suggest? QUESTION 35 The risk-free rate of return can be thought of as consisting of ____ and ____. a. unanticipated inflation; bond default premium b. a zero beta component; an expectation premium c. a real rate of return; an inflation premium d. a real rate of return; a default premium
Jjian 1 maining: 1:26:21 as Which of the following statements is CORRECT? a. If the pure expectations theory is correct, a downward-sloping yield curve indicates that interest rates are expected to decline in the future. O b. Downward-sloping yield curves are inconsistent with the expectations theory. O c. The actual shape of the yield curve depends only on expectations about future inflation. O d. If the yield curve is upward sloping, the maturity risk premium must be positive and the inflation rate must be zero, O e. Yield curves must be either upward or downward sloping-they cannot first rise and then decline. pe here to search 耳雪 ( W.
If interest rates increase because of a previously unanticipated inflation rate risk? long-lived debt instruments will decline more than short-lived debt instruments long-lived debt instruments will decline less than short-lived debt instruments neither set of debt instruments will decline all other things being equal, both should decline equally
If the Fed ____ the interest rates when inflationary expectations remain unchanged, the most likely result is that the value of dollar will ____ and the economy may ____. A. increases; appreciate; weaken B. decreases; appreciate; weaken C. increases; depreciate; strengthen D. decreases; appreciate; strengthen
Inflation has increased to new highs in recent years. How does expectation of higher inflation in the coming years affect interest rates? O A. Demand for bonds increases while supply of bonds declines leading to a higher nominal interest rate. O B. Demand for bonds declines while supply of bonds rises resulting in higher nominal interest rates in the market. O C. Demand for bonds rises in the expectation of higher nominal interest rates leading to a rise in the interest rate. O D. Higher expectation of inflation will lower demand for money causing interest rates to decline in the future.
An inverted yield curve Part 1 A. results when investor demand for longer maturities exceeds the demand for shorter maturities. B. rewards longterm investors for the additional risk they are assuming. C. sometimes results from actions by the Federal Reserve to control inflation. D. means that longterm bonds are yielding more than shortterm bonds.
Consider the folloving scenario analysis: Rate of Return Scenario Recession Probability Stocks Bonds 194 0.20 -4 Normal economy Boom 0.40 204 268 9 0.40 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No Yes O b. Calculate the expected rate of return and standard deviation for each investment. (Do not round Intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)
1. What is the Shape of the Yield Curve today? What does that suggest that the Market is pricing into the future of interest rates? 2. Why should we care what the Term Structure of Interest Rates looks like? 3. What does a Bond Rating tell us about the bond's risk? What does it not tell us about the risk of investing in the bond? 4. The Expectations Theory of the Term Structure of Interest Rates implies that the term structure is the result of expected inflation rates in the future. What else might cause the term structure to be what it is, that might not be in the Expectations Theory?
7. Determinants of market interest rates Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the rate for a riskless security that is exposed to changes in inflation. This is the premium that reflects the risk associated with changes in interest rates for a long-term security. This premium is added when a security lacks marketability, because it cannot be bought and sold quickly without losing value. This is the rate on short-term US Treasury securities, assuming there is no inflation. Over the past several years, Germany, Japan, and Switzerland have had lower interest rates than the United States due to lower values of this premium. It is based on the bond’s rating; the higher the rating, the lower the premium added, thus lowering the…
6. As long as the inflation rate is positive, the nominal rate of return on a security will be the real rate of return. A. greater than B. equal to C. less than D. greater than or equal to
Consider the following scenario analysis A. Is it reasonable to assume that treasury bonds will provide higher returns in recessions than in booms? B. Calculate the expected rate of return and standard deviation for each investment. C. What investment would you prefer?
What happens to market-clearing, or equilibrium, interest rates in a capital marketwhen the supply of funds declines? What happens when expected inflationincreases or decreases?

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Question 19 1 pts Which of the following shocks will decrease the demand for bonds? Select all that apply. The expected return on real estate rises. The volatility of bond returns increases. The expected return on equities falls. Expected inflation decreases. Investor wealth falls.