the economics of money, banking, and financial markets

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24. 
    

    Which of the following long-term bonds has the highest interest rate?
    A) Corporate Baa bonds
    B) Canada bonds
    C) Corporate Aaa bonds
    D) Provincial bonds
    Answer: A
    Diff: 1 Type: MC Page Ref: 115
    Skill: Recall
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates

    
    


25. 
    

    Which of the following securities has the lowest interest rate?
    A) Junk bonds
    B) Canada bonds
    C) Investment-grade bonds
    D) Corporate Baa bonds
    Answer: B
    Diff: 1 Type: MC Page Ref: 115
    Skill: Recall
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates

    
    


26. 
    

    During the Great Depression years 1930-1933 there was a very high rate of business failures
    and defaults, we would expect the risk premium for ____ bonds to be very high.
    A) federal government
    B) corporate Aaa
    C) provincial
    D) corporate Baa
    Answer: D
    Diff: 2 Type: MC Page Ref: 115
    Skill: Applied
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates

    
    


27. 
    

    Risk premiums on corporate bonds tend to ____ during business cycle expansions and
    ____ during recessions, everything else held constant.
    A) increase; increase
    B) increase; decrease
    C) decrease; increase
    D) decrease; decrease
    Answer: C
    Diff: 2 Type: MC Page Ref: 115
    Skill: Applied
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates