Question
Analyze each of the following statements and determine whether it is True, False, or Uncertain. Marking will be based entirely on the supporting arguments. Therefore,
Analyze each of the following statements and determine whether it is True, False, or Uncertain. Marking will be based entirely on the supporting arguments. Therefore, try to be thorough in your answers and base your discussion on the theories that have been reviewed in this course.
A) Interest rates and bond prices tend to move together in the same direction over the long run
B) One example of Barter transaction is when you pay you rent with a check.
C) Typically, lenders have inferior information relative to borrowers about potential returns and risks associated with any investment project. This difference of in information is called asymmetric information
D) When the bond interest rate is below equilibrium in a bond supply and demand graph, we should have excess supply of bonds.
E) A business cycle contraction will decrease the demand for bonds and decrease the supply of bonds and decrease the interest rates.
F) According to the expectations theory of the term structure, it is better to invest in one-year bonds, reinvested over two years, than to invest in a two-year bond if interest rates on one-year bonds are expected to be the same in both years.
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