If 1-year interest rates for the next five years are expected to be 4, 2, 5, 4, and 5 percent,and the 5-year term premium is 1 percent, than the 5-year bond rate will beA) 2 percent.B) 3 percent.C) 4 percent.D) 5 percent

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 thefour-year bond isA) 1 percent.B) 2 percent.C) 3 percent.D) 4 percent

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

Given the information below, which bond(s) will be issued at a premium?   Bond 1 Bond 2 Bond 3 Bond 4Stated Rate of Return 5% 10% 7% 10%Market Rate of Return 7% 8% 7% 9%Multiple ChoiceBond 1Bond 2Bond 3Bonds 2 and 4

Consider a 5-year bond with a face value of $1,000 and an annual coupon rate of 3%. If the yield is 5% then the market price of this bond will be approximately

A bond will issue at a premium when:Multiple Choicethe market rate of interest is equal to the stated rate of interest.the market rate of interest is less than the stated rate of interest.the market rate of interest is more than the stated rate of interest.