26 .

Suppose that the expected return on bonds falls relative to other assets. In the bond market this will result in:

Multiple Choice

• the bond supply curve shifting left.
• a movement down the bond demand curve.
• a shift to the left of the bond demand curve.
• an increase in the price of bonds.

27 .

Suppose that the return on assets other than bonds falls. In the bond market this will result in a(n):

Multiple Choice

• movement down the bond demand curve.
• shift to the left of the bond demand curve.
• increase in the price of bonds.
• shift to the left of the bond supply curve.

28 .

The return on bonds rises relative to other assets, in the bond market this will result in:

Multiple Choice

• the price of bonds falling and the yields increasing.
• a rightward shift in the bond supply curve.
• a shift to the left of the bond demand curve.
• an increase in bond prices.

29 .

The market for bonds is initially described by the supply of bonds - S₀, and the demand for bonds - D₀, with the equilibrium price and quantity being P₀and Q₀. Suppose that the expected return on bonds falls relative to other assets. In the bond market this will result in:

Multiple Choice

• Bond supply curve to shift to S₁
• Bond demand curve to shift to D₁
• Bond supply curve to shift to S₂
• Bond demand curve to shift to D₂

30 .

Which of the following is true of interest-rate risk?

Multiple Choice

• It is the risk that the coupon rate for a bond will change, affecting current bondholders' coupon payments.
• It refers to the probability that a borrower will default on debt obligations.
• It is the risk that the face value of a bond will change before maturity.
• Individuals owning long-term bonds are exposed to greater interest-rate risk.

31 .

U.S. government bonds that provide for bondholders to receive a fixed rate of interest plus the change in the consumer price index were designed to remove:

Multiple Choice

• default risk.
• liquidity risk.
• inflation risk.
• interest-rate risk.

32 .

Interest-rate risk would not matter to which of the following bondholders?

Multiple Choice

• A holder of a U.S. government bond.
• A holder of a U.S. government bond indexed for inflation.
• A holder of a U.S. government bond who plans on selling it in one year.
• A holder of a U.S. government bond that plans on holding it until it matures.