If the expectations theory holds, then a downward sloping curve implies that?

		investors expect a higher rate of defaults in the future
		the Federal Reserve is rapidly increasing the money supply
		investors believe the rate of inflation is going to decrease
		the Federal Reserve is rapidly decreasing the money supply

Question 2

_________ is (are) used as a measure of the required rate of return on risk-free investments

		US government treasury stock
		Federal Reserve stock
		short-term US Treasury bonds
		the current rate of inflation

Question 3

In the short run the Federal Reserve can increase interest rates by _________ Treasury bonds, thereby _______ the money supply

		selling; decreasing
		selling; increasing
		buying; decreasing
		selling; increasing

Question 4

The yield curve shifted down significantly from 2007 to 2013 primarily because?

		default risk premiums decreased
		maturity risk premiums decreased
		inflation risk premiums decreased
		liquidity risk premiums decreased

Question 5

If you pay a share of stock for $44 and sell it one year later for $66 you approximate rate of return will be

Question 6

Which has the highest maturity risk? 1. 1 year corporate bonds; 2. 20 year corporate bonds; 3. 1 year US Treasury bonds; 4. 20 year US treasury bonds

		1 only
		2 only
		3 only
		1 and 3 only
		2 and 4 only

Question 7

Long-term interest rates are usually ___________

		lower than short-term interest rates
		higher than short-term interest rates
		a sign the economy is entering a recession
		less risky than short-term interest rates

Question 8

On any given day, the yield curve for US Treasury bonds will be below the yield curve for AAA corporate bonds

True

False

Question 9

The higher the perceived risk the?

		lower the tax rate
		higher the tax rate
		lower the required rate of return
		higher the required rate of return

Question 10

The higher the probability that a firm will not meet all of its obligations to bondholders the higher is its __________

		interest-rate risk
		market risk
		business risk
		systematic risk
		default risk

Question 11

The Federal Reserve's most important policy tool for influencing interest rates is?

		changing the discount rate
		changing banking laws
		guaranteeing to prevent bankruptcies in the banking industry
		open market operations