1)Municipal bonds sometimes have the lowest yield of all bonds because

Group of answer choices

they often have the lowest default risk.

credit rating agencies had a conflict of interest and rated municipal bonds as much safer than they actually were.

they often have the highest default risk.

interest on municipal bonds is not subject to federal tax.

Which of the following statements is true?

Group of answer choices

2)Most credit rating agencies rate the U.S. federal government at their highest credit rating, but Standard and Poor's downgraded the federal government from AAA to AA+ in 2011 after a debt ceiling crisis.

All credit rating agencies rate the U.S. federal government at their highest credit rating because the federal government has never defaulted.

All credit rating agencies rate the U.S. federal government below their highest credit rating because of a default in 2011.

Legally, credit rating agencies are barred from rating the U.S. federal government below their highest credit rating.

3)Rates on U.S. Treasury bonds of different maturities usually move up or down together because

Group of answer choices

the short rate is mean-reverting.

the short rate is highly persistent.

the short rate is extremely volatile.

long-term rates are mean-reverting.

4)Over the next five years, people expect the one-year bond rate to be 1% for one year, 0% for the next two years, and 2% for the two years after that.According to Expectations Theory, the yield on bonds with respectively one, two, three, four, and five year maturities should be

Group of answer choices

1, 0, 0, 2, 2

2, 2, 2, 2, 2

1, 0.5, 0, 1, 2

1, 0.5, 0.33, 0.75, 1

5)Which of the following doesnotcontribute to the risk premium of a bond?

Group of answer choices

the difficulty of selling the bond

uncertainty about whether scheduled payments will actually happen

uncertainty about the value of scheduled payments

uncertainty about interest rates between now and when the bond matures

6)As of this writing, the yield on three-month Treasuries has been less than 0.1% since the beginning of the year.Based on the normal behavior of yield curves, what would you guess the shape of the yield curve is?

Group of answer choices

upward-sloping

flat

There is no clear pattern to the yield curve when yields are so low.

inverted

7)Risk premia are primarily the result of

Group of answer choices

b) the demand for riskless assets being higher than the demand for risky assets.

c) the supply of risky assets being higher than the supply of riskless assets.

Risk premia are primarily the result of a) the demand for risky assets being higher than the demand for riskless assets.

d) the supply of riskless assets being higher than the supply of risky assets.

8)We focus on the yield curve for Treasuries because

Group of answer choices

d) Treasuries are more liquid than other types of bonds.

a) other types of bonds are only issued with one maturity.

c) Treasuries do not have risk premia while other types of bonds do.

b) Treasuries are issued with many different maturities, and few other bonds are issued with as many maturities.

9)Which of the following stylized facts can be explained by the segmented markets theory but not the expectations theory?

Group of answer choices

b) The yield curve is usually upward sloping.

d) An inverted yield curve is a predictor of an imminent recession.

a) Yields of different maturities tend to move together.

c) If the short rate is high, the yield curve is probably inverted.

10) What is the liquidity premium for Treasuries?

Group of answer choices

b) If the short rate is expected to be constant in the future, short-term Treasuries have a lower price than long-term Treasuries.

a) If the short rate is expected to be constant in the future, long-term Treasuries have a lower price than short-term Treasuries.

d) The short rate is expected to decrease over time because technological improvements will make Treasuries of all maturities more liquid.

c) The short rate is expected to increase over time because technological improvements will make Treasuries of all maturities more liquid.