1. Which of the following is true? a. The Treasury yield curve is always inverte

ID: 2819923 • Letter: 1

Question

1. Which of the following is true?

a. The Treasury yield curve is always inverted

b. The Treasury yield curve always slopes upward

c. The Treasury yield curve was inverted in the early 1980s

d. The Treasury yield curve usually slopes down in the short term and up in the long term

2. What is the most common explanation for an upward sloping yield curve?

a. Decreasing expected inflation

b. Decreasing credit ratings

c. Increasing fluidity premium

d. Increasing maturity risk premium

3. Which of the following is true?

a. When credit ratings increase, bond prices increase

b. If the par value is constant, bond prices decrease

c. When interest rates decrease, bond prices decrease

d. If the coupon rate increases, bond prices decrease

4. Which of the following is true?

a. If the yield to maturity is greater than the coupon rate then the bond will sell at a premium

b. If the yield to maturity is less than the coupon rate then the bond will sell at a premium

c. If the yield to maturity is equal to the coupon rate then the bond will sell at a premium

5. Which of the following is true?

a. The intrinsic value of common stock is the future value of the call price divided by the discount yield

b. The intrinsic value of common stock is the future value of an annuity

c. The intrinsic value of common stock is the present value of coupon payments and the par value

d. The intrinsic value of common stock is the present value of future dividends

Please find below the answers for your reference:-

The correct answer is 1(b)

The correct answer is 2(d)

The correct answer is 3(a)

The correct answer is 4(b)

The correct answer is 5(d)

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