1a) Which of the following statements is FALSE?

A) The relationship between the investment term and the interest rate is called the term structure of interest rates.

B) The plot of the relationship between the investment risk and the interest rate is call the yield curve.

C) The yield curve is a potential leading indicator of future economic growth.

D) The shape of the yield curve will be strongly influenced by interest rate expectations.

1b)

Which of the following statements is FALSE?

A) Investors pay less for bonds with credit risk than they would for otherwise identical default-free bonds.

B) Credit spreads fluctuate as perceptions regarding the probability of default change.

C) Credit spreads are high for bonds with high ratings.

D) We refer to the difference between the yields of the corporate bonds and the Treasury yields as the default spread or credit spread.