If the expected return on bonds increases, all else equal, the demand for bonds increases,the price of bonds ________, and the interest rate ________.A) increases; decreasesB) increases; increasesC) decreases; decreasesD) decreases; increases

11) If bonds with different maturities are perfect substitutes, then the ________ on these bonds must be equal.A) expected returnB) surprise returnC) surplus returnD) excess return12) If the expected path of one-year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today's interest rate on the five-year bond isA) 4 percent.B) 5 percent.C) 6 percent.D) 7 percent.13) If the expected path of 1-year interest rates over the next four years is 5 percent, 4 percent, 2 percent, and 1 percent, then the expectations theory predicts that today's interest rate on the four-year bond isA) 1 percent.B) 2 percent.C) 3 percent.D) 4 percent.14) If the expected path of 1-year interest rates over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and 5 percent, the expectations theory predicts that the bond with the highest interest rate today is the one with a maturity ofA) two years.B) three years.C) four years.D) five years.15) If the expected path of 1-year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity ofA) one year.B) two years.C) three years.D) four years.16) Over the next three years, the expected path of 1-year interest rates is 4, 1, and 1 percent. The expectations theory of the term structure predicts that the current interest rate on 3-year bond isA) 1 percent.B) 2 percent.C) 3 percent.D) 4 percent.17) According to the expectations theory of the term structureA) the interest rate on long-term bonds will exceed the average of short-term interest rates that people expect to occur over the life of the long-term bonds, because of their preference for short-term securities.B) interest rates on bonds of different maturities move together over time.C) buyers of bonds prefer short-term to long-term bonds.D) buyers require an additional incentive to hold long-term bonds.18) According to the expectations theory of the term structureA) when the yield curve is steeply upward sloping, short-term interest rates are expected to remain relatively stable in the future.B) when the yield curve is downward sloping, short-term interest rates are expected to remain relatively stable in the future.C) investors have strong preferences for short-term relative to long-term bonds, explaining why yield curves typically slope upward.D) yield curves should be equally likely to slope downward as slope upward.19) According to the segmented markets theory of the term structureA) bonds of one maturity are close substitutes for bonds of other maturities, therefore, interest rates on bonds of different maturities move together over time.B) the interest rate for each maturity bond is determined by supply and demand for that maturity bond.C) investors' strong preferences for short-term relative to long-term bonds explains why yield curves typically slope downward.D) because of the positive term premium, the yield curve will not be observed to be downward-sloping.20) According to the segmented markets theory of the term structureA) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds.B) buyers of bonds do not prefer bonds of one maturity over another.C) interest rates on bonds of different maturities do not move together over time.D

Along the supply curve for bonds, an increase in the price of bondsa.decreases the interest rate and increases the quantity of bonds supplied.b.decreases the interest rate and decreases the quantity of bonds supplied.c.increases the interest rate and increases the quantity of bonds supplied.d.increases the interest rate and decreases the quantity of bonds supplied.

When interest rate in the economy decreases , the price of existing bonds ____.2 pointsa) Increasesb) Fluctuatec) Decreasesd. Any of the above

Fill in the Blank QuestionFill in the blank question.If interest rates for new comparable bonds increase, the value of a bond will .

If the stated rate of a bond is higher than the market interest rate:Group of answer choicesThe stated rate will increaseThe bond will trade at a discountThe bond will be priced above the face valueThe coupon payment will increase