Chapter15TheTermStructureofInterestRatesMultipleChoiceQuestions1.ThetermstructureofinterestratesisA.therelationshipbetweentheratesofinterestonallsecurities.B.therelationshipbetweentheinterestrateonasecurityanditstimetomaturity.C.therelationshipbetweentheyieldonabondanditsdefaultrate.D.AlloftheoptionsE.Noneoftheoptions2.TreasurySTRIPSareA.securitiesissuedbytheTreasurywithverylongmaturities.B.extremelyriskysecurities.C.createdbysellingeachcouponorprincipalpaymentfromawholeTreasurybondasaseparatecashflow.D.createdbypoolingmortgagepaymentsmadetotheTreasury.3.ThevalueofaTreasurybondshouldA.beequaltothesumofthevalueofSTRIPScreatedfromit.B.belessthanthesumofthevalueofSTRIPScreatedfromit.C.begreaterthanthesumofthevalueofSTRIPScreatedfromit.D.Alloftheoptions.4.IfthevalueofaTreasurybondwashigherthanthevalueofthesumofitsparts(STRIPPEDcashflows)youcouldA.profitbybuyingthestrippedcashflowsandreconstitutingthebond.B.notprofitbybuyingthestrippedcashflowsandreconstitutingthebond.C.profitbybuyingthebondandcreatingSTRIPS.D.notprofitbybuyingthestrippedcashflowsandreconstitutingthebondandprofitbybuyingthebondandcreatingSTRIPS.E.Noneoftheoptions5.IfthevalueofaTreasurybondwaslowerthanthevalueofthesumofitsparts(STRIPPEDcashflows)youcouldA.profitbybuyingthestrippedcashflowsandreconstitutingthebond.B.notprofitbybuyingthestrippedcashflowsandreconstitutingthebond.C.profitbybuyingthebondandcreatingSTRIPS.D.notprofitbybuyingthestrippedcashflowsandreconstitutingthebondandprofitbybuyingthebondandcreatingSTRIPS.E.Noneoftheoptions6.IfthevalueofaTreasurybondwaslowerthanthevalueofthesumofitsparts(STRIPPEDcashflows)A.arbitragewouldprobablyoccur.B.arbitragewouldprobablynotoccur.C.theFEDwouldadjustinterestrates.D.Noneoftheoptions7.IfthevalueofaTreasurybondwashigherthanthevalueofthesumofitsparts(STRIPPEDcashflows)A.arbitragewouldprobablyoccur.B.arbitragewouldprobablynotoccur.C.theFEDwouldadjustinterestrates.D.Noneoftheoptions8.Bondstrippingandbondreconstitutionofferopportunitiesfor______,whichcanoccurifthe_________isviolated.A.arbitrage;lawofonepriceB.arbitrage;restrictivecovenantsC.hugelosses;lawofonepriceD.hugelosses;restrictivecovenants9.______canoccurif_____.A.arbitrage;thelawofonepriceisnotviolatedB.arbitrage;thelawofonepriceisviolatedC.risklesseconomicprofit;thelawofonepriceisnotviolatedD.risklesseconomicprofit;thelawofonepriceisviolatedE.arbitrageandrisklesseconomicprofit;thelawofonepriceisviolated10.TheyieldcurveshowsatanypointintimA.therelationshipbetweentheyieldonabondandthedurationofthebond.B.therelationshipbetweenthecouponrateonabondandtimetomaturityofthebond.C.therelationshipbetweenyieldonabondandthetimetomaturityonthebond.D.AlloftheoptionsE.Noneoftheoptions11.AninvertedyieldcurveimpliesthatA.long-terminterestratesarelowerthanshort-terminterestrates.B.long-terminterestratesarehigherthanshort-terminterestrates.C.long-terminterestratesarethesameasshort-terminterestrates.D.intermediateterminterestratesarehigherthaneithershort-orlong-terminterestrates.E.Noneoftheoptions12.Anupwardslopingyieldcurveisa(n)_______yieldcurve.A.normalB.humpedC.invertedD.flatE.Noneoftheoptions13.Accordingtotheexpectationshypothesis,anupwardslopingyieldcurveimpliesthatA.interestratesareexpectedtoremainstableinthefuture.B.interestratesareexpectedtodeclineinthefuture.C.interestratesareexpectedtoincreaseinthefuture.D.interestr...
