Financial Markets Quiz 2-2

As per the technical definition, the yield curve is referred to

• Yields of any debt securities.

• Yield of bank loans.

• Yields of Treasury securities.

• Yields of any security.

Which of the following is not relevant to the yield curve.

• Credit rating

• Term to maturities

• Yields

• Treasury bonds

Repo interest is computed on

• Discounted interest basis.

• Simple discounted interest basis.

• Add-on interest basis.

• Compounded interest basis.

Relevant interest on a Repo will be paid by the borrower

• On the discounted basis at the beginning of the Repo.

• At maturity of the Repo.

• As periodical coupon rate.

• As the capital gains.

Repo maturity will be

• Equal to the Repo lending amount.

• Lower than the Repo lending.

• Higher than the Repo lending value.

As per the technical definition, which is the borrowing party in a Repo.

• A government

• Any borrower.

• A broker.

• A dealer of government securities.

Why Repo transaction is recognized as security with very low default risk.

• Because Repo is a governments security.

• The borrower is AAA rated borrower.

• It is s short term debt security.

• It is backed by a government security of which the ownership is transferred to the lender.

Normal shape of a yield curve is

• Flat

• Downward sloping

• Humped shape

• Upward sloping

When short term yields are lower than the long term yields in the economy, yield curve will get

• An upward slope.

• A Flat shape.

• A Downward slope.

• A humped shape.

In a flat yield curve.

• Long term yields will be higher than short term yields.

• Long term yields will be lower than short term yields.

• Long term yields will be same as the short term yields.