Question

Question 170.5 pts

The liquidity premium theory of the term structure proposes:

Group of answer choices

longer-term bonds have less default risk.

longer-term bonds are less volatile in price.

investors have a preference for short-term bonds, as they have greater liquidity.

investors have a preference for long-term bonds, as they have lesser liquidity.

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Question 180.5 pts

Which of the following statements about bank accepted bills is NOT correct?

Group of answer choices

The yield on a bank accepted bill is generally higher than the yield on a promissory note .

The yield on a bank bill is generally higher than on a treasury bills.

The interest rate on a bank overdraft is generally higher than the yield on a Treasury note.

The yield on on a bank bill is generally lower than the yield on a Treasury bill.

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Question 190.5 pts

The assumption that prices for short-term and long-term securities are determined in the different maturity ranges is the basis for the _____ approach to explaining the term structure.

Group of answer choices

liquidity premium

yield curve

segmented markets

expectations

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Question 200.5 pts

What is the future value of $12 000 on deposit for four years at 7.00% per annum simple interest?

Group of answer choices

$15 729.55

$12 336.00

$3360.00

$15 360.00

Answer 1

1). The liquidity premium theory of the term structure proposes that investors have a preference for short term bonds since they have greater liquidity. (Option C)

2). Option D is incorrect. The yield on on a bank bill is generally higher, not lower than the yield on a Treasury bill.

3). The assumption that prices for short-term and long-term securities are determined in the different maturity ranges is the basis for the segmented markets approach to explaining the term structure.

4). Future value = present value*(1+interest rate*number of years)

= 12,000*(1+ 7%*4) = 15,360 (Option D)