43. Which of the following would normally be expected to result in an increase in the supply of fund

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43. Which of the following would normally be expected
to result in an increase in the supply of funds, all else equal?

I. The perceived riskiness of all investments decreases.
II. Expected inflation increases.
III. Current income and wealth levels increase.
IV. Near term spending needs of households increase as energy costs rise.
A. I and III only
B. II and III only
C. II, III, and IV only
D. I and IV only
E. I, II, III, and IV

44. An investor requires a 3% increase in purchasing
power in order to induce her to lend. She expects inflation to be 2% next year.
The nominal rate she much charge is about
A. 3%
B. 2%
C. 1%
D. 5%
E. 7%

45. The term structure of interest rates is upward
sloping for all bond types. A certain AAA rated non-callable 10-year corporate
bond has been issued at a 6.15% promised yield. Which one of the following
bonds probably has a higher promised yield?
A. A similar quality municipal bond.
B. A non-callable AAA rated corporate bond with a 5-year maturity.
C. A callable AAA rated corporate bond with a 15-year maturity.
D. A non-callable AAA rated convertible corporate bond with a 10-year
E. All of the above would have a higher promised yield.

46. Which of the following bond types pays interest
that is exempt from federal taxation?
A. Municipal bonds
B. Corporate bonds
C. Treasury bonds
D. Convertible bonds
E. Both A) and C)

47. The relationship between maturity and yield to
maturity is called the __________________.
A. loan covenant
B. term structure
C. bond indenture
D. Fisher effect
E. DRP structure

48. According to the unbiased expectations
A. markets are segmented and buyers stay in their own segment
B. liquidity premiums are negative and time varying
C. the term structure will most often be upward sloping
D. the long-term spot rate is an average of the current and expected
future short-term interest rates
E. forward rates are less than the expected future spot rates


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