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33. (1) An increase in default risk on corporate bonds shifts the demand curve for corporate bonds to the right (IT) An increase in default risk on corporate bonds shifts the demand curve for Treasury bonds to the left A) (I) is true, (II) false. C) Both are true B)(I) is false, (II) true. D) Both are false. 34. As a result of the subprime collapse, the demand for low -quality corporate bonds the demand for high-quality Treasury bonds_ , and the risk premium A) decreased; increased; was unchanged C) decreased; increased; increased B) increased; decreased; was unchanged D) increased; decreased; decreased the demand for 35. An increase in marginal tax rates would likely have the effect of municipal bonds and the demand for U.S. government bonds. A) increasing: increasing C) increasing: decreasing B) decreasing, decreasing D) decreasing: increasing 36. If the expected path of one-year interest rates over the next five years is 1 percent, 3 percent, 8 percent, 9 percent, and 10 percent, then the pure expectations theory predicts that today's interest rate on the three-year bond A) 4 percent. B) 3 percent. C) 2 percent. D) 1 percent. 37. According to the market segmentation theory of the term structure, A) investors' strong preference for short-term relative to long-term bonds explains why yield curves typically slope upward. B) bonds of one maturity are not substitutes for bonds of other maturities; therefore, interest rates on bonds of different maturities do not move together over time. C) the interest rate for bonds of one maturity is determined by the supply and demand for bonds of that maturity. D) all of the above. 38. According to the liquidity premium theory of the term structure, A) because buyers of bonds may prefer bonds of one maturity over another, interest rates on bonds of different maturities do not move together over time. B) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a liquidity premium. C) because of the positive liquidity premium, the yield curve cannot be downward-sloping. D) only A and B of the above