Question
Kindly answer the following Because of the lemons problem the interest rate that an uninformed bank will offer on a loan is Less than the
Kindly answer the following
Because of the "lemons problem" the interest rate that an uninformed bank will offer on a loan is
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| Less than the rate of a low quality borrower. |
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| Equal to the rate of the high quality borrower. |
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| Equal to the rate of a low quality borrower. |
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| Between the rate of a low and high quality borrower. |
Concerning the behavior of interest rates
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| Short-term interest rates are more volatile than long-term interest rates. |
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| Long-term interest rates decline during periods when the economy is expanding. |
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| Short-term interest rates rise in recessionary periods. |
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| None of these answers are true. |
Suppose that the one-year spot interest rate, 0i0,1, is 1% and the two year (annual) spot interest rate, 0i0,2, is 2%, then according to the expectations hypothesis (i.e., assuming no inflation risk premia)
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| The forward rate and the expected future one-year spot rate are approximately 3%. |
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| None of the answers are correct. |
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| The forward rate and the expected future one-year spot rate are approximately 1%. |
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| The forward rate and the expected future one-year spot rate are equal to 8%. |
You would be more or less willing to buy a house because you expect Tesla's stock to double in value next year
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| More, because your wealth has decreased. |
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| More, because it has become less risky relative to the overall stock market. |
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| Less, because it expected return has fallen relative to Tesla's stock. |
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| More, because it has become more liquid. |
Assume that the United States Treasury was selling 10-year notes yielding 9.4%, while the state of Alaska was selling 10-year bonds yielding 6.25%. Which of the following would explain the difference in yields on the two bonds?
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| The coupon interest on the Alaska note is tax-exempt. |
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| The state of Alaska is more creditworthy because of its oil reserves. |
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| The Treasury notes will be worth less at maturity. |
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| The state of Alaska note has a convertibility feature. |
The yield curve
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| Shows the relationship between yields and maturity of debt instruments that have the same risk characteristics. |
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| Assumes maturities are constant and reflects the difference in risk. |
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| Always have an upward slope. |
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| Answers two and three above. |
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| Answers one and three above. |
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