"Tài chính tiền tệ( Tiếng Anh) Financial and monetary theory "
Midterm test 1: Financial and monetary theory (tự luận)
Summary of multiple choice questions and constructed-response question of semester 1
Table of Contents
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- Question 1. If a yield curve looks like the one shown in the figure below, what is the market predicting about the movement of future short-term interest rates? What might the yield curve indicate about the market’s predictions for the inflation rate in the future?
- Question 2. The spread between the interest rates on Baa corporate bonds and U.S. government bonds is very large during the Great Depression years 1930-1933. Explain this difference using the bond supply and demand analysis.
- Question 3. “If stock prices did not follow a random walk, there would be unexploited profit opportunities in the market.” Is this statement true, false, or uncertain? Explain your answer.
- Question 4. If interest rates decline, which would you rather be holding, long-term bonds or short-term bonds? Why? Which type of bond has the greater interest-rate risk?
DETAILED INSTRUCTION
Question 1. If a yield curve looks like the one shown in the figure below, what is the market predicting about the movement of future short-term interest rates? What might the yield curve indicate about the market’s predictions for the inflation rate in the future?
Solution:
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