the economics of money, banking, and financial markets

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Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 6 The Risk and Term Structure of Interest Rates

6.1 Risk Structure of Interest Rates

1. 
   

   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
   Answer: B
   Diff: 1 Type: MC Page Ref: 112
   Skill: Recall
   Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
   rates

   
   


2. 
   

   The risk that interest payments will not be made, or that the face value of a bond is not repaid
   when a bond matures is ____.
   A) interest rate risk
   B) inflation risk
   C) moral hazard
   D) default risk
   Answer: D
   Diff: 1 Type: MC Page Ref: 113
   Skill: Recall
   Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
   rates

   
   


3. 
   

   Canadian government bonds have no default risk because ____.
   A) they are backed by the full faith and credit of the federal government
   B) the federal government can increase taxes to pay its obligations
   C) they are backed with gold reserves
   D) they can be exchanged for silver at any time
   Answer: B
   Diff: 1 Type: MC Page Ref: 113
   Skill: Recall
   Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
   rates