FIN 351 CHAPTER 36 TO 40

FIN 351 CHAPTER 36 TO 40
36. What will happen to the market value of a bond if interest rates increase?
A. The market value will decrease
B. The market value will increase
C. The market value will increase or decrease, depending on the general economic climate
D. The market value should remain level
37. Which is not a theory related to the term structure of interest ratio?
A. Expectations hypothesis
B. Liquidity preference theory
C. Efficient market hypothesis
D. Market segmentation theory
38. The term structure of interest rates refers to
A. The relationships between interest rates and term to maturity
B. The idea that any long-term rate is the average of expected future short term rates
C. A general expectation of higher future interest rates
D. The idea that the terms of the bond may change as time to maturity changes
E. More than one of the above are true
39. Which of the following bond pricing rules is incorrect?
A. Bond prices and interest rates are inversely related
B. Prices of long-term bonds are less sensitive to changes in interest rates than short-term bonds
C. Bond price sensitivity increases at a decreasing rate as maturity increases
D. Bond prices are more sensitive to a decline in market yield to maturity
40. The Oxford Fixed Income Fund invests heavily in bonds. If the fund manager thinks that interest rates are going to fall, what changes
should she make in her investment portfolio?
A. Increase investment in long-term bonds
B. Increase investment in short-term debt instruments
C. Increase investment in equity securities
D. Buy callable bonds
E. Buy real assets