FIN 351 CHAPTER 12 QUIZ 41 TO 45

FIN 351 CHAPTER 12 QUIZ 41 TO 45
41. What effect, if any, will decrease in interest rates have on bond values?
A. Bond values will increase
B. Bond values will decrease
C. Bond values may increase or decrease, depending on the maturity, quality and coupon rate
D. None of the above
42. Assuming interest rates are expected to fall, which of the following will most likely maximize price increase?
A. Commercial paper
B. U.S. Treasury bills
C. 30 year Corporate bonds
D. There is not enough information to tell
43. The upward slope of the yield curve is caused by investors' recognition of the relative difficulty of converting long-term securities to cash.
This is the
A. Expectations hypothesis
B. Liquidity preference theory
C. Market segmentation theory
D. More than one of the above
44. The market segmentation theory focuses on
A. The impact of institutional investors on the yield curve
B. The maturity preferences of banks and those of life insurance companies
C. Phases of the business cycle
D. All of the above
45. A down-sloping yield curve indicates
A. Investor's anticipation of lower interest rates
B. Investor's anticipation of lower inflation
C. That institutional investors are selling long-term bonds
D. More than one of the above