Financial Markets and Institutions, 7e (Mishkin)Chapter 5 How Do Risk and Term Structure Affect Interest Rates Multiple Choice1) The term structure of interest rates isA) the relationship among interest rates of different bonds with the same risk and maturity.B) the structure of how interest rates move over time.C) the relationship among the terms to maturity of different bonds from different issuers.D) the relationship among interest rates on bonds with different maturities but similar risk.Answer: D2) The risk structure of interest rates isA) the structure of how interest rates move over time.B) the relationship among interest rates of different bonds with the same maturity.C) the relationship among the terms to maturity of different bonds.D) the relationship among interest rates on bonds with different maturities.Answer: B3) Which of the following long-term bonds should have the lowest interest rateA) Corporate Baa bondsB) . Treasury bondsC) Corporate Aaa bondsD) Municipal bondsAnswer: D4) Which of the following long-term bonds should have the highest interest rateA) Corporate Baa bondsB) . Treasury bondsC) Corporate Aaa bondsD) Municipal bondsAnswer: A5) The risk premium on corporate bonds becomes smaller ifA) the riskiness of corporate bonds increases.B) the liquidity of corporate bonds increases.C) the liquidity of corporate bonds decreases.D) the riskiness of corporate bonds decreases.E) either B or D of the above occur.Answer: E6) Bonds with relatively low risk of default are calledA) zero coupon bonds.B) junk bonds.C) investment-grade bonds.D) none of the above.Answer: C7) Bonds with relatively high risk of default are calledA) Brady bonds.B) junk bonds.C) zero coupon bonds.D) investment-grade bonds.Answer:...
