322-7

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Author:
SAngell3
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222412
Filename:
322-7
Updated:
2013-06-06 13:08:52
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322-7
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  1. Some researchers argue that because corporate contracts and balance sheets are in nominal terms, rising inflation reduces corporate profitability, causing stock prices to rise.  

    A) True  
    B) False
    B) False
  2. If an upward-sloping yield curve starts to steepen, portfolio managers should try to shorten the maturity of their liabilities.  

    A) True  
    B) False
    B) False
  3. Convexity measures the rate of change of the elasticity of prices with respect to interest rates.  

    A) True  
    B) False
    B) False
  4. The size of the liquidity premium will vary over time but will always remain positive.  

    A) True  
    B) False
    A) True  
  5. An implication of the segmented-markets theory is that policymakers cannot affect the slope of the yield curve.
     
    A) True  
    B) False
    B) False
  6. The published or quoted rate of interest attached to a loan or security is called the:  

    A) interest rate.  
    B) risk-free rate.  
    C) real rate.  
    D) promised rate.  
    E) none of the above
    E) none of the above
  7. The theory that inflation can be added to the real interest rate to obtain the nominal interest rate is called:  

    A) the Fisher Effect.  
    B) the anticipated inflation effect.  
    C) the inflation-risk premium effect.  
    D) the TIPS effect.  
    E) none of the above
    A) the Fisher Effect.  
    (this multiple choice question has been scrambled)
  8. In 1997, the U.S. Treasury issued inflation-indexed bonds known as Treasury Inflation Protection Securities (TIPS). This was done:  
    A) because the Treasury expected a protracted period of high inflation.  
    B) to save the Treasury money.  
    C) so that investors could separate exchange rate risk exposure from interest-rate risk exposure.  
    D) Both A and B  
    E) none of the above
    E) none of the above
  9. When the risk that interest rate changes will affect the total dollar return from a security portfolio is reduced to zero, this is referred to as:  

    A) hedging.  
    B) portfolio protection.  
    C) duration.  
    D) zero price elasticity.  
    E) none of the above
    E) none of the above
  10. Yield curve studies of the yield spread between long-term and short-term government securities are being used to predict:  

    A) the size of government budget deficits.  
    B) the probability of a recession.  
    C) A and B only
    D) A and C only  
    E) the near-term growth in profits.  
    B) the probability of a recession.
    (this multiple choice question has been scrambled)

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