Which of the following statements is correct? A.) A flat yield curve occurs when the yield-to-maturity is virtually unaffected by the term-to-maturity. B.) Real interest rates are generally lower than nominal interest rates. C.) Liquidity risk is the risk that a security may be difficult to sell on short notice for its true value. D.) All of these statements are correct.

Which of the following best explains an upward sloping Treasury yield curve? A. Maturity risk is expected to decline in the future B. Long-term interest rates are more volatile than short-term rates C. Inflation risk premiums are higher for longer terms to maturity D. Default risk is higher for longer terms to maturity

Higher interest rates imply higher required rates of return, which is generally a negative for stock prices a. True b. False

The systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable risk

Which of the following statements is/are most CORRECT? O 11 A yield curve depicts the relationship between bond's 'time to maturity and its yield to maturity. 2) A premium bond's price will decline over time if the required return remains unchanged. 3) A discount bond's price will decline over time if the required return remains unchanged. 4) Both a and b are correct.

In the futures markets, arbitrageurs are mainly interested in: a. reducing their exposure to risk of price changes. b. increasing market liquidity. c. reducing the spread between the bid and ask prices on bonds. d. attempting to make a profit by taking advantage of price differentials between different markets.

Which of the following are characteristics of money market securities? I. Long term maturities. II. Low default risk. III. Highly Marketable. IV. Very liquid.   A. I and III only. B. II and III only. C. II, III and IV only. D. I, II, III and IV

Which one of the following elements of credit risk does not comprise Standalone Risk Default probability Loss given default Default correlation Migration risk

Provide some idea of the effect of the sensitivity of security prices to changes in market interest rates?

Price risk is the risk that Select one: a. the bond principal will not be paid in full or on time. b. market prices increase due to market interest rate changes making bonds more expensive to purchase. c. the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates. d. the yield-to-maturity will be less than the inflation risk causing the real rate of return to be negative. e. coupon payments will be reinvested at a rate that is less than the bond's yield-to-maturity