Exam 7: The Risk and Term Structure of Interest Rates

The slope of the yield curve seems to predict the performance of the economy:

The presence of a term spread that is usually positive indicates that:

Which of the following statements in not true of the yield curve for U.S. Treasury securities?

The risk spread is:

A proposed increase in the federal income tax rate should:

Bonds with the same tax status and ratings:

If a bond's rating improves, we would expect:

The Expectations Hypothesis assumes each of the following, except:

The Expectations Hypothesis cannot explain:

If a one-year bond currently yields 4% and is expected to yield 6% next year, the Liquidity Premium Theory suggests the yield today on a two-year bond will be:

The lowest rating for an investment grade bond assigned by Moody's is:

Investors usually obtain bond ratings from:

Explain why an inverted yield curve is a valuable forecasting tool?

Why might we expect to see a high correlation between increases in the risk structure of interest rates and the yield curve becoming inverted?

Which of the following is true?

When the yield curve is upward sloping, people are expecting:

Which of the following is not typically used for qualifying mortgages as prime or subprime?

The risk spread on bonds fluctuates mainly because:

In the fall of 1998 we saw an increase in the risk spread because:

At the beginning of 2006 the yield curve was usually flat, and sometimes downward sloping (inverted). This raised concerns that a recession might be on the way. But the slope of the yield curve is only part of the story. What else is important?