A plot of the yields on bonds with different terms to maturity but the same risk, Fquidity. and tax considerations is known as A. a term-structure curve: B. an interest-rate curve. C. a risk-structure curve. D. a yield curve. Suppose people expect the interest rate on oneyear bonds for each of the next four years to be 5%,6%,5%, and 6%. If the expectations theory of the term structure of interest rates is correct, then the implied interest rate on bonds with a maturity of four years is (Round your response to the nearest whole number). Refer to the figure on your right. Suppose the expected interest rates on one-year bonds for each of the next four years are 4%,5%,6%, and 7%, respectively. 1.) Use the line drawing fool (ance) to plot the yield curve generated 2) Use the point drawing tool to locate the interest rates on the next four years Given the market activity shown in the diagrams above, the risk premium is Based on this information, it is more likely that the economy is entering What effect would reducing income tax rates have on the interest rates of municipal bonds? A. Inferest rates would fall because Treasury secuities are now less valuable and more people will want to hold municipal bonds B. Interestrates would fall because the reduction in income tax rates would make the tax-exempt privilege for municipal bonds less valuable and reduce the demand for municipal bonds. C. Interest rates would rise because Treasury securities are now less valuable and more people will want to hold municipal bonds D. Interest rates would rise because the reduction in income tax rates would make the tax-exempt privilege for municipal bonds less valuable and redice the demand for municipal bonds Would interest rates of Treasury securalies be affected by the tax rate change? A. Yos, because the increase in interest rates would increase the desire to hold more municipal bonds and less Treasury securities B. No. there would be no impact on the market for Treasury securites. C. Yes, because the reduction in the tax-exempt peivilege in municipal bonds would raise the relative value of Treasury securities, making Treasury secirties more desirable. D. Yes, because municipal bonds are less risky than Treasury securities, the demand for Treasury securites will decrease Match each of the following theories with its description. (Enter a value: 14} ) Description Theory Expeclations theory 1. The interest rate for each bond with a different maturity is determined by the supply of and demand for that bond. with no effects from expected returns on other bonds with other maturities Preferred habitat 2. The interest tate on a long-term bond will equal an average of the short-erm interest rates that people expect to occur over the life of the Segmented markets long-term bond 3. When short-term interest rates are low, yleld curves are more likely to have an upward slope, when short term interest rates are high. yleld curves are more likely to slope downward and be inverted. 4. The interest rate on a long-term bond wall equal an average of shont-terma interest rates expected to occur over the life of the long-term bond plus a liquidity premium (also referred to as a tem premium) that responds to supply and demand conditions for that bocid. A plot of the yields on bonds with different terms to maturity but the same risk, Fquidity. and tax considerations is known as A. a term-structure curve: B. an interest-rate curve. C. a risk-structure curve. D. a yield curve. Suppose people expect the interest rate on oneyear bonds for each of the next four years to be 5%,6%,5%, and 6%. If the expectations theory of the term structure of interest rates is correct, then the implied interest rate on bonds with a maturity of four years is (Round your response to the nearest whole number). Refer to the figure on your right. Suppose the expected interest rates on one-year bonds for each of the next four years are 4%,5%,6%, and 7%, respectively. 1.) Use the line drawing fool (ance) to plot the yield curve generated 2) Use the point drawing tool to locate the interest rates on the next four years Given the market activity shown in the diagrams above, the risk premium is Based on this information, it is more likely that the economy is entering What effect would reducing income tax rates have on the interest rates of municipal bonds? A. Inferest rates would fall because Treasury secuities are now less valuable and more people will want to hold municipal bonds B. Interestrates would fall because the reduction in income tax rates would make the tax-exempt privilege for municipal bonds less valuable and reduce the demand for municipal bonds. C. Interest rates would rise because Treasury securities are now less valuable and more people will want to hold municipal bonds D. Interest rates would rise because the reduction in income tax rates would make the tax-exempt privilege for municipal bonds less valuable and redice the demand for municipal bonds Would interest rates of Treasury securalies be affected by the tax rate change? A. Yos, because the increase in interest rates would increase the desire to hold more municipal bonds and less Treasury securities B. No. there would be no impact on the market for Treasury securites. C. Yes, because the reduction in the tax-exempt peivilege in municipal bonds would raise the relative value of Treasury securities, making Treasury secirties more desirable. D. Yes, because municipal bonds are less risky than Treasury securities, the demand for Treasury securites will decrease Match each of the following theories with its description. (Enter a value: 14} ) Description Theory Expeclations theory 1. The interest rate for each bond with a different maturity is determined by the supply of and demand for that bond. with no effects from expected returns on other bonds with other maturities Preferred habitat 2. The interest tate on a long-term bond will equal an average of the short-erm interest rates that people expect to occur over the life of the Segmented markets long-term bond 3. When short-term interest rates are low, yleld curves are more likely to have an upward slope, when short term interest rates are high. yleld curves are more likely to slope downward and be inverted. 4. The interest rate on a long-term bond wall equal an average of shont-terma interest rates expected to occur over the life of the long-term bond plus a liquidity premium (also referred to as a tem premium) that responds to supply and demand conditions for that bocid