The yield curve varies over time based the relative riskiness of buying a single long-term bond versus purchasing multiple short-term bonds. This explanation of the yield curve is most consistent with A.the Fisher Effect theoryB.the market segmentation theoryC.the unbiased expectations theoryD.the liquidity preference theory

The yield curve varies over time based the relative riskiness of buying a single long-term bond versus purchasing multiple short-term bonds. This explanation of the yield curve is most consistent with A.the Fisher Effect theoryB.the market segmentation theoryC.the unbiased expectations theoryD.the liquidity preference theory

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Duration is important in understanding a fixed income portfolio because A. it is used in the capital asset pricing model B. it measures the interest rate sensitivity of a bonds value C. It measures the correlation with a bank's stock price D. It causes contagion
Explain why bonds of different maturities have different yields in terms of expectations hypotheses. Describe the implications of the hypothesis when the yield curve is upward-sloping. Explain why bonds of different maturities have different yields in terms of liquidity preference hypotheses. Describe the implications of the hypothesis when the yield curve is upward-sloping.
The curvature of the bond price yield curve has been explained to be caused by threebasic theories or hypotheses, namelya) Liquidity preference theoryb) Market segmentation hypothesisc) Expectation hypothesisExplain each of the above and how they influence the price-yield curve
If the liquidity preference hypothesis is true, what shape should the term structure curve have in a period where interest rates are expected to be constant?a. Upward sloping.b. Downward sloping.c. Flat.
If the yield curve in the bond market shows a flat curve, what do you think about the prediction of the liquidity premium in explaining this phenomenon? Then do you prefer the prediction of expectation theory in explaining this phenomenon?
With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to price
There are three explanations for the shape of the yield curve i.e. Unbiased expectations theory, Liquidity theory, and Market segmentation theory. Please Discuss each one and compare them.
A yield curve compares expected returns of stock and bonds to their maturities. Select one: True OR False
An efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of return
Identify a problem associated with using the Black-Ścholes model to value bond options. а. It assumes short-term interest rates are constant. b. It assumes that commissions are charged. С. It assumes fluctuating variance of returns on the underlying asset. d. It assumes that the variance of bond prices is nonconstant over time. е. All of the above.
A portfolio's manager's views on the term structure of interest rates: "Yields reflect expected spot rates and risk premiums. Investors demand risk premiums for holding long-term bonds, and these risk premiums increase with maturity. This manager's views are most consistent with the: A. Segmented markets theory B. Local expectations theory C. Preferred habitat theory OD. Liquidity preference theory
A. Realized return B. Ex ante alpha C. Ex post alpha D. Realized beta Question 7 (MCQ) One example of a build up model is: A. A macroeconomic model B. Capital Asset Pricing Model (CAPM) C. Bond yield plus risk premium D. Fama and French model