If a corporation begins to suffer large losses, then the default risk on the corporate bond will

increase and the bond’s return will become more uncertain, meaning the expected return on the corporate bond will fall.

increase and the bond’s return will become less uncertain, meaning the expected return on the corporate bond will fall.

decrease and the bond’s return will become less uncertain, meaning the expected return on the corporate bond will fall.

decrease and the bond’s return will become less uncertain, meaning the expected return on the corporate bond will rise.

An increase in default risk on corporate bonds ______ the demand for these bonds, but ______ the demand for default–free bonds, everything else held constant.

does not change; greatly increases

moderately lowers; does not change

Which of the following statements are true?

The expected return on corporate bonds decreases as default risk increases.

A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default–free bonds.

A corporate bond’s return becomes less uncertain as default risk increases.

As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default–free bonds.

The spread between interest rates on low quality corporate bonds and U.S. government bonds

widened significantly during the Great Depression.

narrowed significantly during the Great Depression.

narrowed moderately during the Great Depression.

did not change during the Great Depression.

The collapse of the subprime mortgage market

increased the Baa–Aaa spread.

did not affect the corporate bond market.

increased the perceived riskiness of Treasury securities.

During a "flight to quality"

the spread between Treasury bonds and Baa bonds increases.

the spread between Treasury bonds and Baa bonds decreases.

the spread between Treasury bonds and Baa bonds is not affected.

the change in the spread between Treasury bonds and Baa bonds cannot be predicted.

If you have a very low tolerance for risk, which of the following bonds would you be least likely to hold in your portfolio?

a corporate bond with a rating of Baa

a corporate bond with a rating of Aaa

Which of the following statements are true?

A liquid asset is one that can be quickly and cheaply converted into cash.

The demand for a bond declines when it becomes less liquid, decreasing the interest rate spread between it and relatively more liquid bonds.

The differences in bond interest rates reflect differences in default risk only.

The corporate bond market is the most liquid bond market.

Corporate bonds are not as liquid as government bonds because

fewer corporate bonds for any one corporation are traded, making them more costly to sell.

the corporate bond rating must be calculated each time they are traded.

corporate bonds are not callable.

corporate bonds cannot be resold.

Which of the following statements is true?

Bonds issued by state and local governments are called municipal bonds.

State and local governments cannot default on their bonds.

All government issued bonds — local, state, and federal — are federal income tax exempt.

The coupon payment on municipal bonds is usually higher than the coupon payment on Treasury bonds.

Everything else held constant, if the tax-exempt status of municipal bonds were eliminated, then

the interest rate on municipal bonds would exceed the rate on Treasury bonds.

the interest rates on municipal bonds would still be less than the interest rate on Treasury bonds.

the interest rate on municipal bonds would equal the rate on Treasury bonds.

the interest rates on municipal, Treasury, and corporate bonds would all increase.

Municipal bonds have default risk, yet their interest rates are lower than the rates on default-free Treasury bonds. This suggests that

the benefit from the tax-exempt status of municipal bonds exceeds their default risk.

the benefit from the tax-exempt status of municipal bonds is less than their default risk.

the benefit from the tax-exempt status of municipal bonds equals their default risk.

Treasury bonds are not default-free.

Everything else held constant, the interest rate on municipal bonds rises relative to the interest rate on Treasury securities when

municipal bonds become more widely traded.

corporate bonds become riskier.

Everything else held constant, if income tax rates were lowered, then

the interest rate on municipal bonds would rise.

the interest rate on municipal bonds would fall.

the interest rate on Treasury bonds would rise.

the price of Treasury bonds would fall.

Everything else held constant, abolishing all taxes will

increase the interest rate on municipal bonds.

increase the interest rate on corporate bonds.

reduce the interest rate on municipal bonds.

increase the interest rate on Treasury bonds.

Which of the following statements are true?

Because the tax-exempt status of municipal bonds was of little benefit to bond holders when tax rates were low, they had higher interest rates than U.S. government bonds before World War II.

An increase in tax rates will increase the demand for Treasury bonds, lowering their interest rates.

Interest rates on municipal bonds will be higher than comparable bonds without the tax exemption.

Because coupon payments on municipal bonds are exempt from federal income tax, the expected after-tax return on them will be higher for individuals in lower income tax brackets.

Three factors explain the risk structure of interest rates:

liquidity, default risk, and the income tax treatment of a security.

maturity, default risk, and the income tax treatment of a security.

maturity, liquidity, and the income tax treatment of a security.

maturity, default risk, and the liquidity of a security.

Chap 6 M&B

Authored by Vân Vương

Social Studies

University

AI Actions

Add similar questions

Adjust reading levels

Convert to real-world scenario

Translate activity

More...

Content View

Student View

102 questions

Show all answers

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The risk structure of interest rates is

the structure of how interest rates move over time.

the relationship among interest rates of different bonds with the same maturity.

the relationship among the term to maturity of different bonds.

the relationship among interest rates on bonds with different maturities.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures is

interest rate risk.

inflation risk.

moral hazard.

default risk.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Bonds with no default risk are called

flower bonds.

no-risk bonds.

default-free bonds.

zero-risk bonds.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following bonds are considered to be default–risk free?

Municipal bonds

Investment–grade bonds

U.S. Treasury bonds

Junk bonds

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

U.S. government bonds have no default risk because

they are backed by the full faith and credit of the federal government.

the federal government can increase taxes to pay its obligations.

they are backed with gold reserves.

they can be exchanged for silver at any time.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The spread between the interest rates on bonds with default risk and default–free bonds is called the

risk premium.

junk margin.

bond margin.

default premium.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will and the expected return on these bonds will , everything else held constant.

decrease; increase

decrease; decrease

increase; increase

increase; decrease

Access all questions and much more by creating a free account

Create resources

Host any resource

Get auto-graded reports

Continue with Google

Continue with Email

Continue with Classlink

Continue with Clever

or continue with

Microsoft

Apple

Others

Already have an account?

Similar Resources on Wayground

100 questions

勞動法規與人力資源管理測驗

Quiz

•

University

97 questions

Economics Vocabulary needs editing section 2

Quiz

•

4th Grade - University

100 questions

PRA-UAS HUKUM BISNIS

Quiz

•

University

102 questions

FINAL SET 2

Quiz

•

University

105 questions

Latihan UTS Perekonomian Indonesia

Quiz

•

University

105 questions

untitled

Quiz

•

11th Grade - University

Popular Resources on Wayground

7 questions

History of Valentine's Day

Interactive video

•

4th Grade

15 questions

Fractions on a Number Line

Quiz

•

3rd Grade

20 questions

Equivalent Fractions

Quiz

•

3rd Grade

25 questions

Multiplication Facts

Quiz

•

5th Grade

$fractions$

22 questions

fractions

Quiz

•

3rd Grade

15 questions

Valentine's Day Trivia

Quiz

•

3rd Grade

20 questions

Main Idea and Details

Quiz

•

5th Grade

20 questions

Context Clues

Quiz

•

6th Grade

Discover more resources for Social Studies

64 questions

USHC 4 Key Terms 22-23

Quiz

•

11th Grade - University

Chap 6 M&B

The risk structure of interest rates is

The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures is

Bonds with no default risk are called

Which of the following bonds are considered to be default–risk free?

U.S. government bonds have no default risk because

The spread between the interest rates on bonds with default risk and default–free bonds is called the

If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will and the expected return on these bonds will , everything else held constant.

A bond with default risk will always have a risk premium and an increase in its default risk will the risk premium.

If a corporation begins to suffer large losses, then the default risk on the corporate bond will

If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will _, and the bonds’ returns will become _, meaning that the expected return on these bonds will decrease, everything else held constant.

Access all questions and much more by creating a free account

Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for Social Studies

Chap 6 M&B

The risk structure of interest rates is

The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures is

Bonds with no default risk are called

Which of the following bonds are considered to be default–risk free?

U.S. government bonds have no default risk because

The spread between the interest rates on bonds with default risk and default–free bonds is called the

If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will ______ and the expected return on these bonds will ______, everything else held constant.

A bond with default risk will always have a ______ risk premium and an increase in its default risk will ______ the risk premium.

If a corporation begins to suffer large losses, then the default risk on the corporate bond will

If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will _______, and the bonds’ returns will become _______, meaning that the expected return on these bonds will decrease, everything else held constant.

Access all questions and much more by creating a free account

Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for Social Studies

If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will and the expected return on these bonds will , everything else held constant.

A bond with default risk will always have a risk premium and an increase in its default risk will the risk premium.

If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will _, and the bonds’ returns will become _, meaning that the expected return on these bonds will decrease, everything else held constant.