投资学investment 题库Chap015.doc

投资学investment 题库Chap015.doc

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Chapter15TheTermStructureofInterestRates

MultipleChoiceQuestions

1. Thetermstructureofinterestratesis:

A） Therelationshipbetweentheratesofinterestonallsecurities.

B） Therelationshipbetweentheinterestrateonasecurityanditstimetomaturity.

C） Therelationshipbetweentheyieldonabondanditsdefaultrate.

D） Alloftheabove.

E） Noneoftheabove.

Answer:

BDifficulty:

Easy

Rationale:

Thetermstructureofinterestratesistherelationshipbetweentwovariables,yearsandyieldtomaturity（holdingallelseconstant）.

2. Theyieldcurveshowsatanypointintime:

A） Therelationshipbetweentheyieldonabondandthedurationofthebond.

B） Therelationshipbetweenthecouponrateonabondandtimetomaturityofthebond.

C） Therelationshipbetweenyieldonabondandthetimetomaturityonthebond.

D） Alloftheabove.

E） Noneoftheabove.

Answer:

CDifficulty:

Easy

Rationale:

Seerationaleforquestion15.1.

3. Aninvertedyieldcurveimpliesthat:

A） Long-terminterestratesarelowerthanshort-terminterestrates.

B） Long-terminterestratesarehigherthanshort-terminterestrates.

C） Long-terminterestratesarethesameasshort-terminterestrates.

D） Intermediateterminterestratesarehigherthaneithershort-orlong-terminterestrates.

E） noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theinverted,ordownwardsloping,yieldcurveisoneinwhichshort-termratesarehigherthanlong-termrates.Theinvertedyieldcurvehasbeenobservedfrequently,althoughnotasfrequentlyastheupwardsloping,ornormal,yieldcurve.

4. Anupwardslopingyieldcurveisa（n）_______yieldcurve.

A） normal.

B） humped.

C） inverted.

D） flat.

E） noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theupwardslopingyieldcurveisreferredtoasthenormalyieldcurve,probablybecause,historically,theupwardslopingyieldcurveistheshapethathasbeenobservedmostfrequently.

5. Accordingtotheexpectationshypothesis,anormalyieldcurveimpliesthat

A） interestratesareexpectedtoremainstableinthefuture.

B） interestratesareexpectedtodeclineinthefuture.

C） interestratesareexpectedtoincreaseinthefuture.

D） interestratesareexpectedtodeclinefirst,thenincrease.

E） interestratesareexpectedtoincreasefirst,thendecrease.

Answer:

CDifficulty:

Easy

Rationale:

Anupwardslopingyieldcurveisbasedontheexpectationthatshort-terminterestrateswillincrease.

6. Whichofthefollowingisnotproposedasanexplanationforthetermstructureofinterestrates:

A） Theexpectationstheory.

B） Theliquiditypreferencetheory.

C） Themarketsegmentationtheory.

D） Modernportfoliotheory.

E） A,B,andC.

Answer:

DDifficulty:

Easy

Rationale:

A,B,andCarealltheoriesthathavebeenproposedtoexplainthetermstructure.

7. Theexpectationstheoryofthetermstructureofinterestratesstatesthat

A） forwardratesaredeterminedbyinvestors'expectationsoffutureinterestrates.

B） forwardratesexceedtheexpectedfutureinterestrates.

C） yieldsonlong-andshort-maturitybondsaredeterminedbythesupplyanddemandforthesecurities.

D） alloftheabove.

E） noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

Theforwardrateequalsthemarketconsensusexpectationoffutureshortinterestrates.

8. Whichofthefollowingtheoriesstatethattheshapeoftheyieldcurveisessentiallydeterminedbythesupplyanddemandsforlong-andshort-maturitybonds?

A） Liquiditypreferencetheory.

B） Expectationstheory.

C） Marketsegmentationtheory.

D） Alloftheabove.

E） Noneoftheabove.

Answer:

CDifficulty:

Easy

Rationale:

Marketsegmentationtheorystatesthatthemarketsfordifferentmaturitiesareseparatemarkets,andthatinterestratesatthedifferentmaturitiesaredeterminedbytheintersectionoftherespectivesupplyanddemandcurves.

9. Ifforwardratesareknownwithcertaintyandallbondsarefairlypriced

A） allbondswouldhavethesameyieldtomaturity.

B） allshort-maturitybondswouldhavelowerpricesthanalllong-maturitybonds.

C） allbondswouldhavethesameprice.

D） allbondswouldprovideequal1-yearratesofreturn.

E） noneoftheabove.

Answer:

DDifficulty:

Easy

Rationale:

Inaworldofperfectcertainty,allbondmustofferequalratesofreturnoveranyholdingperiod;otherwise,atleastonebondwouldbedominatedbytheothersinthatthisbondwouldofferalowerrateofreturnthanwouldcombinationsofotherbonds.Noonewouldbewillingtoholdthisbond,andthepriceofthebondwoulddecline（lawofoneprice）.

10. Accordingtothe"liquiditypreference"theoryofthetermstructureofinterestrates,theyieldcurveusuallyshouldbe:

A） inverted.

B） normal.

C） upwardsloping.

D） AandB.

E） BandC.

Answer:

EDifficulty:

Easy

Rationale:

Accordingtotheliquiditypreferencetheory,investorswouldprefertobeliquidratherthanilliquid.Inordertoacceptamoreilliquidinvestment,investorsrequirealiquiditypremiumandthenormal,orupwardsloping,yieldcurveresults.

Usethefollowingtoanswerquestions11-14:

Supposethatallinvestorsexpectthatinterestratesforthe4yearswillbeasfollows:

Year

ForwardInterestRate

0

（today）5%

1

7%

2

9%

3

10%

11. Whatisthepriceof3-yearzerocouponbondwithaparvalueof$1,000?

A） $863.83

B） $816.58

C） $772.18

D） $765.55

E） noneoftheabove

Answer:

BDifficulty:

Moderate

Rationale:

$1,000/（1.05）（1.07）（1.09）=$816.58

12. Ifyouhavejustpurchaseda4-yearzerocouponbond,whatwouldbetheexpectedrateofreturnonyourinvestmentinthefirstyeariftheimpliedforwardratesstaythesame?

（Parvalueofthebond=$1,000）

A） 5%

B） 7%

C） 9%

D） 10%

E） noneoftheabove

Answer:

ADifficulty:

Moderate

Rationale:

Theforwardinterestrategivenforthefirstyearoftheinvestmentisgivenas5%（seetableabove）.

13. Whatisthepriceofa2-yearmaturitybondwitha10%couponratepaidannually?

（Parvalue=$1,000）

A） $1,092.97

B） $1,054.24

C） $1,000.00

D） $1,073.34

E） noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

[（1.05）（1.07）]1/2-1=6%;FV=1000,n=2,PMT=100,i=6,PV=$1,073.34

14. Whatistheyieldtomaturityofa3-yearzerocouponbond?

A） 7.00%

B） 9.00%

C） 6.99%

D） 7.49%

E） noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

[（1.05）（1.07）（1.09）]1/3-1=6.99.

Usethefollowingtoanswerquestions15-18:

Thefollowingisalistofpricesforzerocouponbondswithdifferentmaturitiesandparvalueof$1,000.

Maturity（Years）

Price

1

$943.40

2

$881.68

3

$808.88

4

$742.09

15. Whatis,accordingtotheexpectationstheory,theexpectedforwardrateinthethirdyear?

A） 7.00%

B） 7.33%

C） 9.00%

D） 11.19%

E） noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

881.68/808.88-1=9%

16. Whatistheyieldtomaturityona3-yearzerocouponbond?

A） 6.37%

B） 9.00%

C） 7.33%

D） 10.00%

E） noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

（1000/808.81）1/3-1=7.33%

17. Whatisthepriceofa4-yearmaturitybondwitha12%couponratepaidannually?

（Parvalue=$1,000）

A） $742.09

B） $1,222.09

C） $1,000.00

D） $1,141.92

E） noneoftheabove

Answer:

DDifficulty:

Difficult

Rationale:

（1000/742.09）1/4-1=7.74%;FV=1000,PMT=120,n=4,i=7.74,PV=$1,141.92

18. Youhavepurchaseda4-yearmaturitybondwitha10%couponratepaidannually.Thebondhasaparvalueof$1,000.Whatwouldthepriceofthebondbeoneyearfromnowiftheimpliedforwardratesstaythesame?

A） $808.88

B） $1,108.88

C） $1,000

D） $1,042.78

E） noneoftheabove

Answer:

DDifficulty:

Difficult

Rationale:

（943.40/742.09）]1/3-1.0=8.33%;FV=1000,PMT=100,n=3,i=8.33,PV=$1,042.78

19. Themarketsegmentationtheoryofthetermstructureofinterestrates

A） theoreticallycanexplainallshapesofyieldcurves.

B） definitelyholdsinthe"realworld".

C） assumesthatmarketsfordifferentmaturitiesareseparatemarkets.

D） AandB.

E） AandC.

Answer:

EDifficulty:

Easy

Rationale:

Althoughthistheoryisquitetidytheoretically,bothinvestorsandborrowswilldepartfromtheir"preferredmaturityhabitats"ifyieldsonalternativematuritiesareattractiveenough.

20. Giventhefollowingpatternofforwardrates:

Year

ForwardRate

1

5%

2

6%

3

6.5%

Ifoneyearfromnowthetermstructureofinterestrateschangessothatitlooksexactlythesameasitdoestoday,whatwouldbeyourholdingperiodreturnifyoupurchaseda3-yearzerocouponbondtodayandhelditforoneyear?

A） 6%

B） 8%

C） 9%

D） 5%

E） noneoftheabove

Answer:

DDifficulty:

Difficult

Rationale:

$1,000/（1.06）（1.065）=$885.82（sellingprice）;$1,000/（1.05）（1.06）（1.065）=$843.64（purchaseprice）;（$885.82-$843.64）/$843.64=5%.

21. Anupwardslopingyieldcurve

A） isanindicationthatinterestratesareexpectedtoincrease.

B） incorporatesaliquiditypremium.

C） reflectstheconfoundingoftheliquiditypremiumwithinterestrateexpectations.

D） alloftheabove.

E） noneoftheabove.

Answer:

DDifficulty:

Easy

Rationale:

Oneoftheproblemsofthemostcommonlyusedexplanationoftermstructure,theexpectations