Determination of Interest Rates

投资学第7版TestBank答案05Multiple Choice Questions1. Over the past year you earned a nominal rate of interest of 10 percent on your money.The inflation rate was 5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.5%.B) 10.0%.C) 5.0%.D) 4.8%.E) 15.0%Answer: D Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.10% / 1.5% - 1 = 4.8%.2. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the year?A) 4%.B) 10%.C) 7%.D) 3%.E) none of the above.Answer: A Difficulty: EasyRationale: 7% - 3% = 4%.3. If the annual real rate of interest is 5% and the expected inflation rate is 4%, the nominalrate of interest would be approximatelyA) 1%.B) 9%.C) 20%.D) 15%.E) none of the above.Answer: B Difficulty: EasyRationale: 5% + 4% = 9%.4. You purchased a share of stock for $20. One year later you received $1 as dividend andsold the share for $29. What was your holding period return?A) 45%B) 50%C) 5%D) 40%E) none of the aboveAnswer: B Difficulty: ModerateRationale: ($1 + $29 - $20)/$20 = 0.5000, or 50%.5. Which of the following determine(s) the level of real interest rates?I)the supply of savings by households and business firmsII)the demand for investment fundsIII)the government's net supply and/or demand for fundsA) I onlyB) II onlyC) I and II onlyD) I, II, and IIIE) none of the aboveAnswer: D Difficulty: ModerateRationale: The value of savings by households is the major supply of funds; the demand for investment funds is a portion of the total demand for funds; the government'sposition can be one of either net supplier, or net demanderof funds. The above factors constitute the total supply and demand for funds, which determine real interest rates.6. Which of the following statement(s) is (are) true?I)The real rate of interest is determined by the supply and demand for funds.II)The real rate of interest is determined by the expected rate of inflation.III)The real rate of interest can be affected by actions of the Fed.IV)The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.A) I and II only.B) I and III only.C) III and IV only.D) II and III only.E) I, II, III, and IV onlyAnswer: B Difficulty: ModerateRationale: The expected rate of inflation is a determinant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed.7. Which of the following statements is true?A) Inflation has no effect on the nominal rate of interest.B) The realized nominal rate of interest is always greater than the real rate of interest.C) Certificates of deposit offer a guaranteed real rate of interest.D) None of the above is true.E) A, B and CAnswer: D Difficulty: ModerateRationale: Expected inflation rates are a determinant ofnominal interest rates. The realized nominal rate of interest would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed.8. Other things equal, an increase in the government budget deficitA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rates.D) increases business prospects.E) none of the above.Answer: B Difficulty: ModerateRationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drives interest rates up.9. Ceteris paribus, a decrease in the demand for loanable fundsA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rate.D) results from an increase in business prospects and a decrease in the level of savings.E) none of the above.Answer: A Difficulty: ModerateRationale: A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospectswould increase the demand for funds. The savings level affects the supply of, not the demand for, funds.10. The holding period return (HPR) on a share of stock is equal toA) the capital gain yield during the period, plus the inflation rate.B) the capital gain yield during the period, plus the dividend yield.C) the current yield, plus the dividend yield.D) the dividend yield, plus the risk premium.E) the change in stock price.Answer: B Difficulty: ModerateRationale: The HPR of any investment is the sum of the capital gain and the cash flow over the period, which for common stock is B.11. Historical records regarding return on stocks, Treasury bonds, and Treasury billsbetween 1926 and 2005 show thatA) stocks offered investors greater rates of return than bonds and bills.B) stock returns were less volatile than those of bonds and bills.C) bonds offered investors greater rates of return than stocks and bills.D) bills outperformed stocks and bonds.E) treasury bills always offered a rate of return greater than inflation.Answer: A Difficulty: ModerateRationale: The historical data show that, as expected, stocks offer a greater return and greater volatility than the otherinvestment alternatives. Inflation sometimes exceeded the T-bill return.12. If the interest rate paid by borrowers and the interest rate received by savers accuratelyreflects the realized rate of inflation:A) borrowers gain and savers lose.B) savers gain and borrowers lose.C) both borrowers and savers lose.D) neither borrowers nor savers gain or lose.E) both borrowers and savers gain.Answer: D Difficulty: ModerateRationale: If the described interest rate accurately reflects the rate of inflation, bothborrowers and lenders are paying and receiving, respectively, the real rate of interest;thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock: 13. What is the expected holding period return for KMP stock?A) 10.40%B) 9.32%C) 11.63%D) 11.54%E) 10.88%Answer: A Difficulty: ModerateRationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = 10.4%14. What is the expected standard deviation for KMP stock?A) 6.91%B) 8.13%C) 7.79%D) 7.25%E) 8.85%Answer: B Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2]1/2 = 8.13%15. What is the expected variance for KMP stock?A) 66.04%B) 69.96%C) 77.04%D) 63.72%E) 78.45%Answer: A Difficulty: DifficultRationale: s = [.30 (18 - 10.4)2 + .50 (12 - 10.4)2 + .20 (-5 - 10.4)2] = 66.04%16. If the nominal return is constant, the after-tax real rate of returnA) declines as the inflation rate increases.B) increases as the inflation rate increases.C) declines as the inflation rate declines.D) increases as the inflation rate decreases.E) A and D.Answer: E Difficulty: ModerateRationale: Inflation rates have an inverse effect on after-tax real rates of return.17. The risk premium for common stocksA) cannot be zero, for investors would be unwilling to invest in common stocks.B) must always be positive, in theory.C) is negative, as common stocks are risky.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: If the risk premium for common stocks were zero or negative, investorswould be unwilling to accept the lower returns for the increased risk.18. A risk-free intermediate or long-term investmentA) is free of all types of risk.B) does not guarantee the future purchasing power of its cash flows.C) does guarantee the future purchasing power of its cash flows as it is insured by the U.S. Treasury.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows. As a result, purchasing power risk is present.19. You purchase a share of Boeing stock for $90. One year later, after receiving a dividendof $3, you sell the stock for $92. What was your holding period return?A) 4.44%B) 2.22%C) 3.33%D) 5.56%E) none of the aboveAnswer: D Difficulty: ModerateRationale: HPR = (92 - 90 + 3) / 90 = 5.56%20. Toyota stock has the following probability distribution of expected prices one year fromnow:If you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on T oyota?A) 17.72%B) 18.89%C) 17.91%D) 18.18%E) None of the aboveAnswer: D Difficulty: DifficultRationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1) = 18.18%.21. Which of the following factors would not be expected to affect the nominal interestrate?A) the supply of loanable fundsB) the demand for loanable fundsC) the coupon rate on previously issued government bondsD) the expected rate of inflationE) government spending and borrowingAnswer: C Difficulty: EasyRationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates.22. Your Certificate of Deposit will mature in one week andyou are considering how toinvest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If you invest in a 2-year CD the bank will pay you 6% interest. Which option would youchoose?A) the 30-day CD, no matter what you expect interest rates to do in the futureB) the 2-year CD, no matter what you expect interest rates to do in the futureC) the 30-day CD if you expect that interest rates will fall in the futureD) the 2-year CD if you expect that interest rates will fall in the futureE) You would be indifferent between the 30-day and the 2-year CDs.Answer: D Difficulty: ModerateRationale: You would prefer to lock in the higher rate on the 2-year CD rather thansubject yourself to reinvestment rate risk. If you expected interest rates to rise in the future the opposite choice would be better.23. In words, the real rate of interest is approximately equal toA) the nominal rate minus the inflation rate.B) the inflation rate minus the nominal rate.C) the nominal rate times the inflation rate.D) the inflation rate divided by the nominal rate.E) the nominal rate plus the inflation rate.Answer: A Difficulty: EasyRationale: The actual relationship is (1 + real rate) = (1 +nominal rate) / (1 + inflation rate). This can be approximated by the equation: real rate = nominal rate - inflation rate.24. If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels offunds lent will __________ and the equilibrium level of real interest rates will___________A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseE) reverse direction from their previous trendsAnswer: B Difficulty: ModerateRationale: A lower discount rate would encourage banks to make more loans, which would increase the money supply. The supply curve would shift to the right and the equilibrium level of funds would increase while the equilibrium interest rate would fall.25. What has been the relationship between T-Bill rates and inflation rates since the 1980s?A) The T-Bill rate was sometimes higher than and sometimes lower than the inflationrate.B) The T-Bill rate has equaled the inflation rate plus a constant percentage.C) The inflation rate has equaled the T-Bill rate plus a constant percentage.D) The T-Bill rate has been higher than the inflation rate almost the entire period.E) The T-Bill rate has been lower than the inflation ratealmost the entire period.Answer: D Difficulty: ModerateRationale: The T-Bill rate was higher than the inflation rate for over two decades.26. “Bracket Creep” happens whenA) tax liabilities are based on real income and there is a negative inflation rate.B) tax liabilities are based on real income and there is a positive inflation rate.C) tax liabilities are based on nominal income and there is a negative inflation rate.D) tax liabilities are based on nominal income and there is a positive inflation rate.E) too many peculiar people make their way into the highest tax bracket.Answer: D Difficulty: ModerateRationale: A positive inflation rate typically leads to higher nominal income. Higher nominal income means people will have higher tax liabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.27. The holding-period return (HPR) for a stock is equal toA) the real yield minus the inflation rate.B) the nominal yield minus the real yield.C) the capital gains yield minus the tax rate.D) the capital gains yield minus the dividend yield.E) the dividend yield plus the capital gains yield.Answer: E Difficulty: EasyRationale: HPR consists of an income component and a price change component. The income component on a stock is the dividend yield. The price change component is the capital gainsyield.28. The historical arithmetic rate of return on small stocks over the 1926-2005 period hasbeen _______. The standard deviation of small stocks' returns has been ________ than the standard deviation of large stocks' returns.A) 12.43%, lowerB) 13.11%, lowerC) 16.24%, higherD) 17.95%, higherE) 21.53%, higherAnswer: D Difficulty: ModerateRationale: See Table 5-5.Use the following to answer question 29:You have been given this probability distribution for the holding period return for Cheese, Inc stock:29. Assuming that the expected return on Cheese's stock is 14.35%, what is the standarddeviation of these returns?A) 4.72%B) 6.30%C) 4.38%D) 5.74%E) None of the aboveAnswer: D Difficulty: ModerateRationale: Variance = .20*(24-14.35)2 + .45*(15-14.35)2 + .35*(8-14.35)2 = 32.9275.Standard deviation = = 5.74.30. An investor purchased a bond 45 days ago for $985. He received $15 in interest andsold the bond for $980. What is the holding period return on his investment?A) 1.52%B) 0.50%C) 1.92%D) 0.01%E) None of the aboveAnswer: E Difficulty: EasyRationale: HPR = ($15+980-985)/$985 = .0 = approximately 1.02%.31. Over the past year you earned a nominal rate of interest of 8 percent on your money.The inflation rate was 3.5 percent over the same period. The exact actual growth rate of your purchasing power wasA) 15.55%.B) 4.35%.C) 5.02%.D) 4.81%.E) 15.04%Answer: B Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.08 / 1.035 - 1 = 4.35%.32. Over the past year you earned a nominal rate of interest of 14 percent on your money.The inflation rate was 2 percent over the same period. The exact actual growth rate of your purchasing power wasA) 11.76%.B) 16.00%.C) 15.02%.D) 14.32%.E) none of the above.Answer: A Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.14 / 1.02 - 1 = 11.76%.33. Over the past year you earned a nominal rate of interest of 12.5 percent on your money.The inflation rate was 2.6 percent over the same period. The exact actual growth rate of your purchasing power wasA) 9.15%.B) 9.90%.C) 9.65%.D) 10.52%.E) none of the above.Answer: C Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.125 / 1.026 - 1 = 9.65%.34. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 4%.B) 2%.C) 6%.D) 3%.E) none of the above.Answer: B Difficulty: EasyRationale: 4% - 2% = 2%.35. A year ago, you invested $2,500 in a savings account that pays an annual interest rate of2.5%. What is your approximate annual real rate of return if the rate of inflation was1.6% over the year?A) 4.1%.C) 2.9%.D) 1.6%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% - 1.6% = 0.9%.36. A year ago, you invested $12,000 in an investment that produced a return of 16%. Whatis your approximate annual real rate of return if the rate of inflation was 2% over the year?A) 18%.B) 2%.C) 16%.D) 15%.E) none of the above.Answer: E Difficulty: EasyRationale: 16% - 2% = 14%.37. If the annual real rate of interest is 3.5% and the expected inflation rate is 2.5%, thenominal rate of interest would be approximatelyA) 3.5%.B) 2.5%.C) 1%.D) 6.8%.E) none of the above.Answer: E Difficulty: EasyRationale: 3.5% + 2.5% = 6%.38. If the annual real rate of interest is 2.5% and the expected inflation rate is 3.4%, thenominal rate of interest would be approximatelyB) 0.9%.C) -0.9%.D) 7%.E) none of the above.Answer: E Difficulty: EasyRationale: 2.5% + 3.4% = 5.9%.39. If the annual real rate of interest is 4% and the expected inflation rate is 3%, the nominalrate of interest would be approximatelyA) 4%.B) 3%.C) 1%.D) 5%.E) none of the above.Answer: E Difficulty: EasyRationale: 4% + 3% = 7%.40. You purchased a share of stock for $12. One year later you received $0.25 as dividendand sold the share for $12.92. What was your holding period return?A) 9.75%B) 10.65%C) 11.75%D) 11.25%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($0.25 + $12.92 - $12)/$12 = 0.975, or 9.75%.41. You purchased a share of stock for $120. One year later you received $1.82 as dividendand sold the share for $136. What was your holding period return?A) 15.67%B) 22.12%C) 15.67%D) 13.24%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($1.82 + $136 - $120)/$120 = 0.1485, or 14.85%.42. You purchased a share of stock for $65. One year later you received $2.37 as dividendand sold the share for $63. What was your holding period return?A) 0.57%B) -0.2550%C) -0.89%D) 1.63%E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($2.37 + $63 - $65)/$65 = 0.0056, or 0.57%.Use the following to answer questions 43-45:You have been given this probability distribution for the holding period return for a stock:43. What is the expected holding period return for the stock?A) 11.67%B) 8.33%C) 9.56%D) 12.4%E) None of the aboveAnswer: E Difficulty: ModerateRationale: HPR = .40 (22%) + .35 (11%) + .25 (-9%) = 10.4%44. What is the expected standard deviation for the stock?A) 2.07%B) 9.96%C) 7.04%D) 1.44%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [.40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2]1/2 = 12.167%45. What is the expected variance for the stock?A) 142.07%B) 189.96%C) 177.04%D) 128.17%E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [ .40 (22 - 10.4)2 + .35 (11 - 10.4)2 + .25 (-9 - 10.4)2] = 148.04%46. Which of the following measures of risk best highlights the potential loss from extremenegative returns?A) Standard deviationB) VarianceC) Upper partial standard deviationD) Value at Risk (VaR)E) None of the aboveAnswer: D Difficulty: Moderate47. Over the past year you earned a nominal rate of interest of 3.6 percent on your money.The inflation rate was 3.1 percent over the same period. The exact actual growth rate of your purchasing power wasA) 3.6%.B) 3.1%.C) 0.5%.D) 6.7%.E) none of the aboveAnswer: E Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; 1.036/ 1.031% - 1 = 0.328%.48. A year ago, you invested $1,000 in a savings account that pays an annual interest rate of4.3%. What is your approximate annual real rate of return if the rate of inflation was 3%over the year?A) 4.3%.B) -1.3%.C) 7.3%.D) 3%.E) none of the above.Answer: E Difficulty: EasyRationale: 4.3% - 3% = 1.3%.49. If the annual real rate of interest is 3.5% and the expected inflation rate is 3.5%, thenominal rate of interest would be approximatelyA) 0%.B) 3.5%.C) 12.25%.D) 7%.E) none of the above.Answer: D Difficulty: EasyRationale: 3.5% + 3.5% = 7%.50. You purchased a share of CSCO stock for $20. One year later you received $2 asdividend and sold the share for $31. What was your holding period return?A) 45%B) 50%C) 60%D) 40%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($2 + $31 - $20)/$20 = 0.65, or 65%.Use the following to answer questions 51-53:You have been given this probability distribution for the holding period return for GM stock:51. What is the expected holding period return for GM stock?A) 10.4%B) 11.4%C) 12.4%D) 13.4%E) 14.4%Answer: E Difficulty: ModerateRationale: HPR = .40 (30%) + .40 (11%) + .20 (-10%) = 14.4%52. What is the expected standard deviation for GM stock?A) 16.91%B) 16.13%C) 13.79%D) 15.25%E) 14.87%Answer: E Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2]1/2 = 14.87%53. What is the expected variance for GM stock?A) 200.00%B) 221.04%C) 246.37%D) 14.87%E) 16.13%Answer: B Difficulty: DifficultRationale: s = [.40 (30 - 14.4)2 + .40 (11 - 14.4)2 + .20 (-10 - 14.4)2] = 221.04%54. You purchase a share of CAT stock for $90. One year later, after receiving a dividendof $4, you sell the stock for $97. What was your holding period return?A) 14.44%B) 12.22%C) 13.33%D) 5.56%E) none of the aboveAnswer: B Difficulty: ModerateRationale: HPR = ([97 - 90] + 4) / 90 = 12.22%55. When comparing investments with different horizons the ____________ provides themore accurate comparison.A) arithmetic averageB) effective annual rateC) average annual returnD) historical annual averageE) none of the aboveAnswer: B Difficulty: Easy56. Annual Percentage Rates (APRs) are computed usingA) simple interest.B) compound interest.C) either A or B can be used.D) best estimates of expected real costs.E) none of the above.Answer: B Difficulty: Easy57. An investment provides a 2% return semi-annually, its effective annual rate isA) 2%.B) 4%.C) 4.02%D) 4.04%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.02)2 -1 = 4.04%58. An investment provides a 3% return semi-annually, its effective annual rate isA) 3%.B) 6%.C) 6.06%D) 6.09%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.03)2 -1 = 6.09%59. An investment provides a 2.1% return quarterly, its effective annual rate isA) 2.1%.B) 8.4%.C) 8.56%D) 8.67%E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1.021)4 -1 = 8.67%60. Skewnes is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) None of the aboveAnswer: C Difficulty: Moderate61. Kurtosis is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) A and CAnswer: C Difficulty: Moderate62. When a distribution is positively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: A Difficulty: Moderate63. When a distribution is negatively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: C Difficulty: Moderate64. If a distribution has “fat tails” i t exhibitsA) positive skewnessB) negative skewnessC) a kurtosis of zeroD) kutrosisE) A and DAnswer: D Difficulty: ModerateEssay Questions65. Discuss the relationships between interest rates (both real and nominal), expectedinflation rates, and tax rates on investment returns.Difficulty: ModerateAnswer:The nominal interest rate is the quoted interest rate; however this rate is approximately equal to the real rate of interest plus the expected rate of inflation. Thus, an investor is expecting to earn the real rate in terms of the increased purchasing power resulting from the investment. In addition, the investor should consider the after-tax returns on theinvestment. The higher the inflation rate, the lower the real after-tax rate of return.Investors suffer an inflation penalty equal to the tax rate times the inflation rate.The rationale for this question is to ascertain that the student understands therelationships among these basic determinants of the after-tax real rate of return.66. Discuss why common stocks must earn a risk premium.Difficulty: EasyAnswer:Most investors are risk averse; that is, in order to accept the risk involved in investing in common stocks, the investors expect a return from the stocks over and above the return the investors could earn from a risk-free investment, such as U. S. Treasury issues. This excess return (the return in excess of the risk-free rate) is the risk premium required by the investors to invest in common stocks.The purpose of this question is to ascertain that the students understanding the basicrisk-return relationship, as the relationship applies to investing in common stocks vs. arisk-free asset (i.e., why would investors be willing to assume the risk of common stock as investment vehicles)?67. Discuss the law of one price and how this concept relates to the possibility of earningarbitrage profits?Difficulty: ModerateAnswer:The law of one price states that equivalent securities are equally (or almost equally) priced when sold on different markets. As a result, risk-free arbitrage profits should not be possible.The purpose of this question to introduce the student to arbitrage profits and market efficiency.68. Discuss the historical distributions of each of the following in terms of their averagereturn and the dispersion of their returns: U. S. small company stocks, U. S. largecompany stocks, U. S. long-term government bonds, and U.S. T-bills. Would any of these investments cause a loss in purchasing power during a 1926-2005 holding period?Difficulty: DifficultAnswer:The data given in T ables 5.3 & 5.5Whether the averages are measured on a geometric basis or an arithmetic basis, theranking is always the same, with small company average>large companyaverage>government bond average>T-bill average. With regard to risk, therelationships among the standard deviations are small company>largecompany>government bonds>T-bills. These ranks indicate that the ex-post dataconfirm what would be expected - higher returns are earned to compensate for theincreased risk. None of these investments would have caused a loss in purchasingpower during the 1926-2002 period, because all had average returns higher than the average inflation rate.The goal of this question is to see if students have a general idea of the historicalrelationships among the returns and risk levels of various categories of investmentsrelative to each other and to the level of inflation.69. Discuss some reasons why an investor with a long time horizon might choose to investin common stocks, even though they have historically been。

CFA考试一级章节练习题精选0329-16（附详解）1、Which of these definitions of duration is most relevant to a bond investor? A bond’s duration is its:【单选题】A.half-life.B.price sensitivity to yield changes.C.first derivative of value with respect to its yield.正确答案:B答案解析:“Introduction to the Measurement of Interest Rate Risk,” Frank J. Fabozzi, CFA2011 Modular Level I, Vol. 5, pp. 630-631.Study Session 15-67-fDistinguish among the alternative definitions of duration and explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options.B is correct because bond investors are concerned about interest rate risk, and duration is a good measure of interest rate risk.2、Which of the following is least likely a short-term funding method available to banks?【单选题】A.Central bank fundsB.Syndicated loansC.Negotiable certificate of deposits正确答案:B答案解析:A syndicated loan is a loan from a group of lenders, called the "syndicate," to a single borrower.Syndicated loans are primarily originated by banks, and the loans are extended to companies butalso to governments and government-related entities.CFA Level I"Fixed-Income Markets: Issuance, Trading, and Funding," Moorad Choudhry, Steven V. Mann, andLavone F. WhitmerSection 73、If a bond’s issuer is required to retire a specified portion of the issue each year, the bond most likely:【单选题】A.is callable.B.is a step-up note.C.has a sinking fund provision.正确答案:C答案解析:“Features of Debt Securities”, Frank J. Fabozzi, CFA2013 Modular Level I, Vol. 5, Reading 52, Section 6.3Study Session 15-52-dExplain the provisions for redemption and retirement of bonds.C is correct because a sinking fund provision requires retirement of a portion of the bond issue each year, rather than retirement of the entire issue at maturity.4、An analyst does research about duration and gathered the following informationabout an option-free bond with $10 000 000 face value, $9 500 000 marketvalueand a duration of 3.2.If the yield on this bond immediately increased by 25base points, the new price of this bond based solely on duration would be closestto:【单选题】A.$9 196 000B.$9 424 000C.$9 920 000正确答案:B答案解析:$9 500 000 × （1 - 0.25% × 3.2）= $9 424 000。

Determinants of commercial bank interest margins and profitability:some international evidenceAsli Demirgüç-Kunt and Harry Huizinga1Revised: November 1998Abstract: Using bank level data for 80 countries in the 1988-1995 period, this paper shows that differences in interest margins and bank profitability reflect a variety of determinants: bank characteristics, macroeconomic conditions, explicit and implicit bank taxation, deposit insurance regulation, overall financial structure, and several underlying legal and institutional indicators. Controlling for differences in bank activity, leverage, and the macroeconomic environment, we find that a larger bank asset to GDP ratio and a lower market concentration ratio lead to lower margins and profits. Foreign banks have higher margins and profits compared to domestic banks in developing countries, while the opposite holds in developed countries. Also, there is evidence that the corporate tax burden is fully passed on to bank customers.Keywords: bank profitability, taxation, financial structureJEL Classification: E44, G211 Development Research Group, The World Bank, and Department of Economics, Tilburg University, and CEPR, respectively.Comments by three anonymous referees are gratefully acknowledged. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank, its ExecutiveDirectors, or the countries they represent. We thank Anqing Shi for excellent research assistance and Paulina Sintim-Aboagye for help with the manuscript.1.IntroductionAs financial intermediaries, banks play a crucial role in the operation of most economies. Recent research, as surveyed by Levine (1996), has shown that the efficacy of financial intermediation can also affect economic growth. Crucially, financial intermediation affects the net return to savings, and the gross return for investment. The spread between these two returns mirrors the bank interest margins, in addition to transaction costs and taxes borne directly by savers and investors. This suggests that bank interest spreads can be interpreted as an indicator of the efficiency of the banking system. In this paper, we investigate how bank interest spreads are affected by taxation, the structure of the financial system, and financial regulations such as deposit insurance.A comprehensive review of determinants of interest spreads is offered by Hanson and Rocha (1986). That paper summarizes the role that implicit and explicit taxes play in raising spreads and goes on to discuss some of the determinants of bank costs and profits, such as inflation, scale economies, and market structure. Using aggregate interest data for 29 countries in the years 1975-1983, the authors find a positive correlation between interest margins and inflation.Recently, several studies have examined the impact of international differences in bank regulation using cross-country data. Analyzing interest rates in 13 OECD countries in the years 1985-1990, Bartholdy, Boyle, and Stover (1997) find that the existence of explicit deposit insurance lowers the deposit interest rate by 25 basis points. Using data from 19 developed countries in 1993, Barth, Nolle and Rice (1997) further examine the impact of banking powers on bank return on equity - controlling for a variety of bank and market characteristics. Variation in banking powers, bank concentration and the existence of explicit deposit insurance do not significantly affect the return on bank equity.This paper extends the existing literature in several ways. First, using bank-level data for 80 developed and developing countries in the 1988-1995 period, we provide summary statistics on size anddecomposition of bank interest margins and profitability. Second, we use regression analysis to examine the underlying determinants of interest spreads and bank profitability. The empirical work enables us to infer to what extent the incidence of taxation and regulation is on bank customers and/or the banks themselves.Apart from covering many banks in many countries, this study is unique in its coverage of interest margin and profitability determinants. These determinants include a comprehensive set of bank characteristics (such as size, leverage, type of business, foreign ownership), macro indicators, taxation and regulatory variables, financial structure variables, and legal and institutional indices. Among these, the ownership variable, the tax variables, some of the financial structure variables, and the legal and institutional indicators have not been included in any previous study in this area. To check whether some of these determinants affect banking differently in developing and developed countries, we further interact these variables with the country’s GDP per capita.The results indicate that bank characteristics, macro indicators, implicit and explicit financial taxation, deposit insurance, overall financial structure, and the legal and institutional environment all significantly affect bank interest spreads and profitability.Our results show that well-capitalized banks have higher net interest margins and are more profitable. This is consistent with the fact that banks with higher capital ratios tend to face a lower cost of funding due to lower prospective bankruptcy costs. In addition, a bank with higher equity capital simply needs to borrow less in order to support a given level of assets.Differences in the bank activity mix also have an impact on spreads and profitability. Our results show that banks with relatively high non-interest earning assets are less profitable. Also, banks that rely largely on deposits for their funding are less profitable, as deposits apparently require high branchingand other expenses. Similarly, variation in overhead and other operating costs is reflected in variation in bank interest margins, as banks pass on their operating costs to their depositors and lenders.The international ownership of banks also has a significant impact on bank spreads and profitability. Foreign banks, specifically, realize higher interest margins and higher profitability than domestic banks in developing countries. This finding may reflect that in developing countries a foreign bank’s technological edge is relatively strong, apparently strong enough to overcome any informational disadvantage in lending or raising funds locally. Foreign banks, however, are shown to be less profitable in developed countries, as there they may not have a technological edge.Macroeconomic factors also explain variation in interest margins. We find that inflation is associated with higher realized interest margins and higher profitability. Inflation entails higher costs -more transactions, and generally more extensive branch networks - and also higher income from bank float. The positive relationship between inflation and bank profitability implies that bank income increases more with inflation than bank costs. Further, high real interest rates are associated with higher interest margins and profitability, especially in developing countries. This may reflect that in developing countries demand deposits frequently pay zero or below market interest rates.Banks are subject to implicit and explicit taxation that may affect their operations. Implicit taxes include reserve and liquidity requirements that are remunerated at less-than-market rates.2 We find that reserves reduce interest margins and profits especially in developing countries, since there the opportunity cost of holding reserves tends to be higher and remuneration rates are lower. Explicit taxes translate into higher net interest margins and bank profitability. In fact, the regression coefficients suggest that the corporate tax is fully passed on to bank customers in poor and rich countries alike, and is not2 Directed and subsidized credit practices that interfere with the banks’ credit allocation policies represent additional implicit taxes.However, due to lack of data for most of the countries in our sample we do not evaluate the impact of such practices here.simply a tax on bank rents. This result is consistent with the common notion that bank stock investors need to receive a net-of-company-tax return that is independent of this company tax.The existence of an explicit deposit insurance scheme coincides with lower interest margins. The effect on bank profitability is also negative, although it is not significant. These results may reflect design and implementation problems inherent in explicit deposit insurance systems.Regarding financial structure, banks in countries with a more competitive banking sector -- where banking assets constitute a larger portion of the GDP -- have smaller margins and are less profitable. The bank concentration ratio positively affects bank profitability, and larger banks tend to have higher margins. A larger stock market capitalization to GDP increases bank margins, reflecting possible complementarity between debt and equity financing. A larger stock market capitalization to bank assets, however, is related negatively to margins, suggesting relatively well-developed stock markets can substitute for bank finance.Finally, we find that legal and institutional differences matter. Indicators of better contract enforcement, efficiency of the legal system and lack of corruption are associated with lower realized interest margins and lower profitability.Section 2 next describes the basic approach of this study. Section 3 discusses the data. Section 4 presents the empirical results. Section 5 concludes.2.Investigating banking spreads and profitabilityThe efficiency of bank intermediation can be measured by both ex ante and ex post spreads. Ex ante spreads are calculated from the contractual rates charged on loans and rates paid on deposits. Ex post spreads consist of the difference between banks’actual interest revenues and their actual interest expenses. The ex post measure of the spread generally differs from the ex ante measure on account ofloan defaults. The ex post spread is more useful, as it controls for the fact that banks with high-yield, risky credits are likely to face more defaults. An additional problem with using ex ante spread measures is that data are generally available at the aggregate industry level and are put together from a variety of different sources and thus are not completely consistent. For these reasons, we focus on ex post interest spreads in this paper.3As a measure of bank efficiency, we consider the accounting value of a bank’s net interest income over total assets, or the net interest margin. To reflect bank profitability, we consider the bank’s before-tax profits over total assets, or before tax profit/ta. By straightforward accounting, before tax profit/ta is the sum of after-tax profits over total assets, or net profit/ta, and taxes over total assets, or tax/ta. From the bank’s income statement, before tax profit/ta further satisfies the following accounting identity:(1)before tax profit/ta = net interest margin + non-interest income/ta - overhead/ta- loan loss provisioning/tawhere the non-interest income/ta variable reflects that many banks also engage in non-lending activities, such as investment banking and brokerage services; the overhead/ta variable accounts for the bank’s entire overhead associated with all its activities, while loan loss provisioning/ta simply measures actual provisioning for bad debts.While net interest margin can be interpreted as a rough index of bank (in)efficiency, this does not mean that a reduction in net interest margins always signals improved bank efficiency. To see this, note that a reduction in net interest margins can, for example, reflect a reduction in bank taxation or,3 A problem with ex post spreads, however, is that the interest income and loan loss reserving associated with a particular loan tend tomaterialize in different time periods.alternatively, a higher loan default rate. In the first instance, the reduction in net interest margins reflects an improved functioning of the banking system, while in the second case the opposite may be true. Also, note that variation in an accounting ratio such as net interest margin may reflect differences in net interest income (the numerator) or differences in (say) non-lending assets (in the denominator). In the data set, the accounting data is organized so as to be comparable internationally. All the same, there may remain differences in accounting conventions regarding the valuation of assets, loan loss provisioning, hidden reserves, etc.4This study focuses on accounting measures of income and profitability, as (risk-adjusted) financial returns on bank stocks are equalized by investors in the absence of prohibitive barriers. For this same reason, Gorton and Rosen (1995) and Schranz (1993) also focus on accounting measures of profitability when examining managerial entrenchment and bank takeovers.The above accounting identity suggests a useful decomposition of realized interest spreads, i.e. net interest margin, into its constituent parts, i.e. into non-interest income, overhead, taxes, loan loss provisions, and after-tax bank profits. This approach, with some modifications, is taken in the study by Hanson and Rocha (1986). As a first step to analyzing the data, section 3 of the paper provides an accounting breakdown of the net interest variable, net interest margin, for individual countries and for selected aggregates. While it may be misleading to compare accounting ratios without controlling for differences in the macroeconomic environment the banks operate in and the differences in their business, product mix, and leverage, these breakdowns still provide a useful initial assessment of differences across countries.4 See Vittas (1991) for an account of the pitfalls in interpreting bank operating ratios. Accounting data also tend to reflect economicrealities with a long lag so that they inadequately flag pending banking crises such as those that have recently occurred in South-East Asia.Next, controlling for bank characteristics and the macro environment, we provide an economic analysis of the determinants of the interest and profitability variables, net interest margin, and before tax profit/ta. This empirical work also provides insights as to how bank customers and the banks themselves are affected by these variables. The net interest margin regressions specifically tell us how the combined welfare of depositors and lenders is affected by the spread determinants. The relationship between the interest spread variable and a bank’s corporate taxes, for instance, informs us to what extent a bank is able to shift its tax bill forward to its depositors and lenders. Next, the before tax profit/ta regressions give information on how spread determinants affect bank shareholders. Equivalently, the relationship between bank profitability and bank corporate income taxes reflects to what extent a bank can pass on its tax bill to any of its customers, depositors, lenders or otherwise.5The subsequent regression analysis starts from the following basic equation:(2)I ijt = αo + αi B ijt+ βj X jt + γt T t + ∗j C j + εijtwhere I ijt is the independent variable (either net interest margin or before tax profits/ta) for bank i in country j at time t; B ijt are bank variables for bank i in country j at time t; X jt are country variables for country j at time t; and T t and C j are time and country dummy variables. Further, αo is a constant, and αi,βj, γt and ∗j are coefficients, while εijt is an error term. Several specifications of (2) are estimated that differ in which bank and country variables are included.5 Generally, taxes and other variables can change interest rates as well as quantity variables, i.e. loan and deposit volumes. In the shortterm, the major effects may come through pricing changes, in which casenet interest margin and before tax profit/ta immediately yield easily interpreted welfare consequences for the banks and their customers. With market imperfections in the form of credit rationing or imperfect competition in the credit markets, changes in quantities generally have first order welfare implications independently of changes in prices. Quantity changes, however, are not pursued in the empirical work.3.The dataThis study uses income statement and balance sheet data of commercial banks from the BankScope data base provided by IBCA (for a complete list of data sources and variable definitions, see the Appendix). Coverage by IBCA is very comprehensive in most countries, with banks included roughly accounting for 90 percent of the assets of all banks. We started with the entire universe of commercial banks worldwide, with the exception that for France, Germany and the United States only several hundred commercial banks listed as ‘large’were included. To ensure reasonable coverage for individual countries, we included only countries where there were at least three banks in a country for a given year. This yielded a data set covering 80 countries during the years 1988-1995, with about 7900 individual commercial bank accounting observations. This data set includes all OECD countries, as well as many developing countries and economies in transition. For a list of countries, see Table 1.Table 1 provides country averages of interest spreads and bank profitability. Column 1 provides information on net interest income over assets, or net interest margin, as a percentage. At the low end, there are several countries such as Luxembourg, the Netherlands and Egypt with a net interest margin of about 1 percent. For the case of Egypt, the low net interest margin can be explained by a predominance of low-interest directed credits by the large state banking sector. Generally, developing countries, and especially Latin American countries such as Argentina, Brazil, Costa Rica, Ecuador and Jamaica, display relatively large accounting spreads. This is also true for certain Eastern European countries such as Lithuania and Romania. Columns 3 though 6 provide an accounting breakdown of the net interest income into its four components: overhead minus non-interest income, taxes, loan loss provisioning, and net profits, all divided by net interest income. These shares add to one hundred percent except for cases where information on loan loss provisioning is missing.The tax/ni variable reflects the explicit taxes paid by the banks (mostly corporate income taxes). Banks also face implicit taxation due to reserve and liquidity requirements and other restrictions on lending through directed/subsidized credit policies. These indirect forms of taxing banks show up directly in lower net interest income rather than in its decomposition. Nonetheless, the tax/ni variable indicates that there is considerable international variation in the explicit taxation of commercial banks. Several countries in Eastern Europe (for example Lithuania, Hungary and the Czech Republic) impose high explicit taxes on banking. The lowest value of tax/ni is at 0 for Qatar, in the absence of significant taxation of banking. For some countries, such as Norway, Sweden or Costa Rica, low tax/ni values reflect the tax deductibility of plentiful bad debts.The loan loss provisioning/ni variable is a direct measure of difference in credit quality across countries but it also reflects differences in provisioning regulations. This variable is high for some Eastern European countries. The loan loss provisioning/ni variable is also high for some developed countries such as France and the Nordic countries. As a residual, the net profits/ni variable reflects to what extent the net interest margin translates into net-of-tax profitability.Columns 7-11 of Table 1 further tabulate the various accounting ratios (relative to total assets) in the accounting identity (1) presented above. The non-interest income/ta variable reveals the importance of fee-based services for banks in different countries. Banks in Eastern Europe, for example in Estonia, Hungary, and Russia, seem to rely heavily on fee-based operations. This is also the case in some Latin American countries, such as, Argentina, Brazil, Colombia, Peru and a few African countries as in Nigeria, and Zambia.The overhead/ta variable provides information on variation in bank operating costs across banking systems. This variable reflects variation in employment as well as in wage levels. Despite high wages, the overhead/ta variable appears to be lowest at around 1 percent for high-income countries,such as Japan and Luxembourg. The overhead/ta cost measure is notably high at 3.6 percent for the United States, perhaps reflecting the proliferation of banks and bank branches due to banking restrictions. In the tax/ta column, Jamaica, Lithuania, and Romania stand out with high tax-to-assets ratios of around 2 percent. Loan loss provisioning, proxied by loan loss provisioning/ta, is equally high in Eastern Europe, and in some developing countries. Finally, net profits over assets, or net profit/ta, also tends to be relatively high in developing countries.In Table 2 we present statistics on accounting spreads and profitability for selected aggregates. The first breakdown is by ownership; a bank is said to be foreign-owned if fifty percent or more of its shares is owned by foreign residents. The table displays a rather small difference in the net interest margin variable for domestic banks (at 3.7 percent) and foreign banks (at 2.9 percent). This small difference, however, masks that foreign banks tend to achieve higher interest margins in developing countries, and lower interest margins in developed countries.6 These facts may reflect that foreign banks are less subject to credit allocation rules and have technical advantages (in developing countries), but also have distinct informational disadvantages relative to domestic banks (everywhere).Interestingly, foreign banks pay somewhat lower taxes than domestic banks (as indicated by the tax/ta variable). This difference may reflect different tax rules governing domestic and foreign banks, but also foreign banks’opportunities to shift profits internationally to minimize their global tax bill. Foreign banks also have a relatively low provisioning as indicated by loan loss provisioning/ta, which is consistent with the view that foreign banks generally do not engage in retail banking operations.6 See Claessens, Demirgηç-Kunt and Huizinga (1997) for more detailed information on the average spreads of domestic and foreignbanks for different groupings of countries by income. This paper also considers how entry by foreign banks affects the interest spreads and operating costs of domestic banks.The next breakdown in the table is by bank size. For countries with at least 20 banks, large banks are defined as the 10 largest banks by assets. Large banks tend to have lower margins and profits and smaller overheads. They also pay relatively low direct taxes, and have lower loan loss provisioning.The table also considers bank groupings by national income levels and location.7 Analyzing data on 4 income levels, we see that the net interest margin is highest for the middle income groups. Banks in the middle income group also have the highest values for the overhead/ta, tax/ta, and loan loss provisioning/ta variables. The net profit/ta variable tends to be highest for banks in the lower income groups. Banks in the high income group, instead, achieve the lowest net interest margin, and they face the lowest ratios of overhead, taxes, loan loss provisioning, and net profits to assets.Next, the breakdown by regions reveals that the net interest margin is highest in the transitional economies at 6.4 percent, and also rather high in Latin America at 6.2 percent, while it is the lowest for industrialized countries at 2.7 percent. The transitional countries further stand out with high ratios of overhead, taxes, loan loss provisioning, and net profits to assets. Industrialized countries, have the lowest net profit/ta value at 0.4 percent, probably due to high level of competition in banking services. Figures 1 and 2 also illustrate income decomposition for different regions.Table 3 provides information on some of the macroeconomic and institutional indicators used in the regression analysis. The data is for 1995, or the most recent year available. The tax rate variable is computed on a bank-by-bank basis as taxes paid divided by before-tax profits. The figure reported in the table is the average for all banks in the country in 1995. The reserves/deposits variable is defined as the banking system’s aggregate central bank reserves divided by aggregate banking system deposits. Actual reserve holdings reflect required as well as excess reserves. Reserves are generally remunerated7 For country groupings by income, see the World Development Report (1996). Countries in transition are China, the Czech Republic,Estonia, Hungary, Lithuania, Poland, Romania, Russia, and Slovenia.at less-than-market rates, and therefore actual reserves may be a reasonable proxy for required reserves, as averaged over the various separate deposit categories. For several developing countries, Botswana, Costa Rica, El Salvador, Jordan, and for Greece, the reserves ratio is above 40 percent, indicating substantial financial repression. In contrast, this ratio is rather low in Belgium, France and Luxembourg at 0.01.The deposit insurance variable is a dummy variable that takes on a value of one if there is an explicit deposit insurance scheme (with defined insurance premia and insurance coverage), and a value of zero otherwise. Even for the case of an explicit deposit insurance scheme, however, the ex post insurance coverage may prove to be higher than the de jure coverage, if the deposit insurance agency chooses to guarantee all depositors. With a value of zero, there is no explicit deposit insurance, even if there may be some type of implicit insurance by the authorities.Next, the table presents some indicators of financial market structure. The concentration variable is defined as the ratio of the three largest banks’assets to total banking sector assets. As is well known, the concentration of the U.S. banking market is rather low, at a value of 16 percent, compared to values of about 50 percent for France and Germany.8 The number of banks in the table reflects the number of banks in the data set with complete information. The bank/gdp ratio defined as the total assets of the deposit money banks divided by GDP. This ratio reflects the overall level of development of the banking sector. The next variable, mcap/gdp is the ratio of stock market capitalization to GDP, as a measure of the extent of stock market development. Developing countries tend to have lower bank/gdp andmcap/gdp ratios, with some notable exceptions. Malaysia, South Africa and Thailand, for instance, have relatively high ratios for both variables.8 The U.S. figure may understate the concentration ratio in individual banking markets, as protected from outside competition byinterstate banking and branching restrictions.The final column in the table provides an index of law and order, which is one of the institutional variables used in the regression analysis. This variable is scaled from 0 to 6, with higher scores indicating sound political institutions and strong court system. Lower scores, in contrast, reflect a tradition where physical force or illegal means are used to settle claims. The table reflects that there is considerable variation in legal effectiveness among countries in the sample.4.Empirical resultsThis section presents regression results. Table 4 and Table 5 report the results of regressions of the net interest margin and before tax profit/ta variables, respectively. All regressions include country and year fixed effects. The tables include several specifications, with the basic specification including a set of bank-level variables, and macroeconomic indicators as regressors. These are important control variables which we include in all specifications. Subsequently, we add the taxation variables, the deposit insurance index, financial structure variables, and legal and institutional indicators. The deposit insurance index, is again excluded from the specification in columns 4 and 5, while the financial structure variables are excluded from the specification in column 5. The reason for dropping some variables from regressions 4 and 5 is that we wish to ensure that banks from a reasonable number of countries are included in the regressions. The estimation technique is weighted least squares, with the weight being the inverse of the number of banks for the country in a given year. This weighing corrects for the fact that the number of banks varies considerably across countries. The five specifications in the two tables are discussed in each of the five subsections.。

货币银行学第六章纸质练习姓名：班级：学号：请注意，选择题的答案请写在下面的方框中，否则判为0分。

Multiple Choice1)The risk structure of interest rates is(a)the structure of how interest rates move over time.(b)the relationship among interest rates of different bonds with the same maturity.(c)the relationship among the term to maturity of different bonds.(d)the relationship among interest rates on bonds with different maturities.2)Default risk is the risk that(a)a bond issuer is unable to make interest payments.(b)a bond issuer is unable to make a profit.(c)a bond issuer is unable to pay the face value at maturity.(d)all of the above.(e)both (a) and (c) above.3)The spread between the interest rates on bonds with default risk and default-free bonds iscalled the(a)risk premium.(b)junk margin.(c)bond margin.(d)default premium.4)When the default risk in corporate bonds decreases, other things equal, the demand curve forcorporate bonds shifts to the _____ and the demand curve for Treasury bonds shifts to the _____.(a)right; right(b)right; left(c)left; left(d)left; right5)The risk premium on corporate bonds becomes smaller if(a)the riskiness of corporate bonds increases.(b)the liquidity of corporate bonds increases.(c)the liquidity of corporate bonds decreases.(d)the riskiness of corporate bonds decreases.(e)both (b) and (d) occur.6) A decrease in the liquidity of corporate bonds will _____ the price of corporate bondsand _____ the yield of Treasury bonds.(a)increase; increase(b)reduce; reduce(c)increase; reduce(d)reduce; increase(e)reduce; not affect7)An increase in marginal tax rates would likely have the effect of _____ the demandfor municipal bonds, and _____ the demand for U.S. government bonds.(a)increasing; increasing(b)increasing; decreasing(c)decreasing; increasing(d)decreasing; decreasing8)Three factors explain the risk structure of interest rates:(a)liquidity, default risk, and the income tax treatment of a security.(b)maturity, default risk, and the income tax treatment of a security.(c)maturity, liquidity, and the income tax treatment of a security.(d)maturity, default risk, and the liquidity of a security.(e)maturity, default risk, and inflation.9)The term structure of interest rates is(a)the relationship among interest rates of different bonds with the same maturity.(b)the structure of how interest rates move over time.(c)the relationship among the term to maturity of different bonds.(d)the relationship among interest rates on bonds with different maturities.10)When yield curves are steeply upward sloping,(a)long-term interest rates are above short-term interest rates.(b)short-term interest rates are above long-term interest rates.(c)short-term interest rates are about the same as long-term interest rates.(d)medium-term interest rates are above both short-term and long-term interest rates.(e)medium-term interest rates are below both short-term and long-term interest rates.11)According to the expectations theory of the term structure(a)the interest rate on long-term bonds will equal an average of short-term interestrates that people expect to occur over the life of the long-term bonds.(b)buyers of bonds do not prefer bonds of one maturity over another.(c)yield curves should be as equally likely to slope downward as slope upward.(d)all of the above.(e)only (a) and (b) of the above.12)If the expected path of one-year interest rates over the next five years is 4 percent, 5percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today’s interest rate on the five-year bond is(a)4 percent.(b)5 percent.(c)6 percent.(d)7 percent.(e)8 percent.13)According to the segmented markets theory of the term structure(a)the interest rate for each maturity bond is determined by supply and demand forthat maturity bond.(b)investors’ strong preferences for short-term relative to long-term bondsexplains why yield curves typically slope upward.(c)bonds of one maturity are close substitutes for bonds of other maturities, therefore,interest rates on bonds of different maturities move together over time.(d)all of the above.(e)only (a) and (b) of the above.14)The liquidity premium theory of the term structure(a)indicates that today’s long-term interest rate equals the average of short-terminterest rates that people expect to occur over the life of the long-term bond.(b)assumes that bonds of different maturities are perfect substitutes.(c)suggests that markets for bonds of different maturities are completely separatebecause people have preferred habitats.(d)does none of the above.15)If 1-year interest rates for the next four years are expected to be 4, 2, 3, and 3 percent, andthe 4-year term premium is 1 percent, than the 4-year bond rate will be(a)1 percent.(b)2 percent.(c)3 percent.(d)4 percent.(e)5 percent.16)According to the liquidity premium theory of the term structure(a)when short-term interest rates are expected to rise in the future, the yield curvewill be steeply upward sloping.(b)when short-term interest rates are expected to remain unchanged in the future, theyield curve is likely to be slightly upward sloping.(c)when short-term interest rates are expected to decline moderately in the future, theyield curve is likely to be flat.(d)all of the above.(e)only (a) and (b) of the above.17)Which of the following theories of the term structure is (are) able to explain the factthat interest rates on bonds of different maturities tend to move together over time?(a)The expectations theory(b)The segmented markets theory(c)The liquidity premium theory(d)Both (a) and (b) of the above(e)Both (a) and (c) of the above18)The preferred habitat theory of the term structure is closely related to the(a)expectations theory of the term structure.(b)segmented markets theory of the term structure.(c)liquidity premium theory of the term structure.(d)the inverted yield curve theory of the term structure.(e)risk premium theory of the term structure19)A particularly attractive feature of the _____ is that it tells you what the market ispredicting about future short-term interest rates by just looking at the slope of the yield curve.(a)segmented markets theory(b)expectations theory(c)liquidity premium theory(d)both (a) and (b) of the aboveFigure 6-120)The steeply upward sloping yield curve in Figure 6-1 indicates that(a)short-term interest rates are expected to rise in the future.(b)short-term interest rates are expected to fall moderately in the future.(c)short-term interest rates are expected to fall sharply in the future.(d)short-term interest rates are expected to remain unchanged in the future.Essay Questions21)Demonstrate graphically and explain how a reduction in default risk affects the demandor supply of corporate and Treasury bonds.22)What is the shape of the yield curve when short rates are expected to fall in themedium term, and then increase? Demonstrate this graphically.。

货币银行学第六章纸质练习姓名：班级：学号：请注意，选择题的答案请写在下面的方框中，否则判为0分。

Multiple Choice1)The risk structure of interest rates is(a)the structure of how interest rates move over time.(b)the relationship among interest rates of different bonds with the same maturity.(c)the relationship among the term to maturity of different bonds.(d)the relationship among interest rates on bonds with different maturities.2)Default risk is the risk that(a)a bond issuer is unable to make interest payments.(b)a bond issuer is unable to make a profit.(c)a bond issuer is unable to pay the face value at maturity.(d)all of the above.(e)both (a) and (c) above.3)The spread between the interest rates on bonds with default risk and default-free bonds iscalled the(a)risk premium.(b)junk margin.(c)bond margin.(d)default premium.4)When the default risk in corporate bonds decreases, other things equal, the demand curve forcorporate bonds shifts to the _____ and the demand curve for Treasury bonds shifts to the _____.(a)right; right(b)right; left(c)left; left(d)left; right5)The risk premium on corporate bonds becomes smaller if(a)the riskiness of corporate bonds increases.(b)the liquidity of corporate bonds increases.(c)the liquidity of corporate bonds decreases.(d)the riskiness of corporate bonds decreases.(e)both (b) and (d) occur.6) A decrease in the liquidity of corporate bonds will _____ the price of corporate bondsand _____ the yield of Treasury bonds.(a)increase; increase(b)reduce; reduce(c)increase; reduce(d)reduce; increase(e)reduce; not affect7)An increase in marginal tax rates would likely have the effect of _____ the demandfor municipal bonds, and _____ the demand for U.S. government bonds.(a)increasing; increasing(b)increasing; decreasing(c)decreasing; increasing(d)decreasing; decreasing8)Three factors explain the risk structure of interest rates:(a)liquidity, default risk, and the income tax treatment of a security.(b)maturity, default risk, and the income tax treatment of a security.(c)maturity, liquidity, and the income tax treatment of a security.(d)maturity, default risk, and the liquidity of a security.(e)maturity, default risk, and inflation.9)The term structure of interest rates is(a)the relationship among interest rates of different bonds with the same maturity.(b)the structure of how interest rates move over time.(c)the relationship among the term to maturity of different bonds.(d)the relationship among interest rates on bonds with different maturities.10)When yield curves are steeply upward sloping,(a)long-term interest rates are above short-term interest rates.(b)short-term interest rates are above long-term interest rates.(c)short-term interest rates are about the same as long-term interest rates.(d)medium-term interest rates are above both short-term and long-term interest rates.(e)medium-term interest rates are below both short-term and long-term interest rates.11)According to the expectations theory of the term structure(a)the interest rate on long-term bonds will equal an average of short-term interestrates that people expect to occur over the life of the long-term bonds.(b)buyers of bonds do not prefer bonds of one maturity over another.(c)yield curves should be as equally likely to slope downward as slope upward.(d)all of the above.(e)only (a) and (b) of the above.12)If the expected path of one-year interest rates over the next five years is 4 percent, 5percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today’s interest rate on the five-year bond is(a)4 percent.(b)5 percent.(c)6 percent.(d)7 percent.(e)8 percent.13)According to the segmented markets theory of the term structure(a)the interest rate for each maturity bond is determined by supply and demand forthat maturity bond.(b)investors’ strong preferences for short-term relative to long-term bondsexplains why yield curves typically slope upward.(c)bonds of one maturity are close substitutes for bonds of other maturities, therefore,interest rates on bonds of different maturities move together over time.(d)all of the above.(e)only (a) and (b) of the above.14)The liquidity premium theory of the term structure(a)indicates that today’s long-term interest rate equals the average of short-terminterest rates that people expect to occur over the life of the long-term bond.(b)assumes that bonds of different maturities are perfect substitutes.(c)suggests that markets for bonds of different maturities are completely separatebecause people have preferred habitats.(d)does none of the above.15)If 1-year interest rates for the next four years are expected to be 4, 2, 3, and 3 percent, andthe 4-year term premium is 1 percent, than the 4-year bond rate will be(a)1 percent.(b)2 percent.(c)3 percent.(d)4 percent.(e)5 percent.16)According to the liquidity premium theory of the term structure(a)when short-term interest rates are expected to rise in the future, the yield curvewill be steeply upward sloping.(b)when short-term interest rates are expected to remain unchanged in the future, theyield curve is likely to be slightly upward sloping.(c)when short-term interest rates are expected to decline moderately in the future, theyield curve is likely to be flat.(d)all of the above.(e)only (a) and (b) of the above.17)Which of the following theories of the term structure is (are) able to explain the factthat interest rates on bonds of different maturities tend to move together over time?(a)The expectations theory(b)The segmented markets theory(c)The liquidity premium theory(d)Both (a) and (b) of the above(e)Both (a) and (c) of the above18)The preferred habitat theory of the term structure is closely related to the(a)expectations theory of the term structure.(b)segmented markets theory of the term structure.(c)liquidity premium theory of the term structure.(d)the inverted yield curve theory of the term structure.(e)risk premium theory of the term structure19)A particularly attractive feature of the _____ is that it tells you what the market ispredicting about future short-term interest rates by just looking at the slope of the yield curve.(a)segmented markets theory(b)expectations theory(c)liquidity premium theory(d)both (a) and (b) of the aboveFigure 6-120)The steeply upward sloping yield curve in Figure 6-1 indicates that(a)short-term interest rates are expected to rise in the future.(b)short-term interest rates are expected to fall moderately in the future.(c)short-term interest rates are expected to fall sharply in the future.(d)short-term interest rates are expected to remain unchanged in the future.Essay Questions21)Demonstrate graphically and explain how a reduction in default risk affects the demandor supply of corporate and Treasury bonds.22)What is the shape of the yield curve when short rates are expected to fall in themedium term, and then increase? Demonstrate this graphically.。

CFA考试⼀级章节练习题精选0331-63（附详解）CFA考试⼀级章节练习题精选0331-63附详解）1、A fixed income security’s current price is 101.45. You estimate that the price will rise to 103.28 if interest rates decrease 0.25% and fall to 100.81 if interest rates increase 0.25%. The security’s effective duration is closest to:【单选题】A.1.22.B.4.87.C.9.74.正确答案:B答案解析:“Introduction to the Measurement of Interest Rate Risk,” Frank J. Fabozzi= (103.28 – 100.81)/(2 × 101.45 × 0.0025) = 4.87.2、The duration and convexity of an option-free bond priced at $90.25 are 10.34 and 75.80, respectively. If yields increase by 200 basis points, the percentage change of the price is closest to:【单选题】A.–23.71%.B.–20.68%.C.–17.65%.正确答案:C答案解析:“Introduction to the Measurement of Interest Rate Risk” Frank J. Fabozzi, CFA3、All else equal, the difference between the nominal spread and the Z-spread for a non-Treasurysecurity will most likely be larger when the:【单选题】A.yield curve is flat.B.yield curve is steep.C.security has a bullet maturity rather than an amortizing structure.正确答案:B答案解析:“Yield Measures, Spot Rates, and Forward Rates”, Frank J. Fabozzi, CFAB is correct because the main factor causing any diffe rence between the nominal spread and theZ-spread is the shape of the Treasury spot rate curve. The steeper the spot rate curve, thegreater the difference.4、An analyst does research about difference between an option-free bond and acallable /doc/1467ce74aa956bec0975f46527d3240c8447a184.html pared to an otherwise identical option-free bond, a callablebond is least likely to have:【单选题】A.a more uncertain cash flow pattern.B.less price appreciation potential as interest rates fall.C.more price depreciation potential as interest rates rise.正确答案:C答案解析:相对于不含权的债券，可赎回债券的现⾦流由于其可能被赎回⽽更加不确定。