the economics of money, banking, and financial markets

160 $

© 2014 Pearson Canada Inc.$

36. 
    

    An increase in the liquidity of corporate bonds will ____ the price of corporate bonds
    and ____ the yield of Canada bonds, everything else held constant.
    A) increase; increase
    B) reduce; reduce
    C) increase; reduce
    D) reduce; increase
    Answer: A
    Diff: 1 Type: MC Page Ref: 116 - 117
    Skill: Applied
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates

    
    


37. 
    

    The risk premium on corporate bonds reflects the fact that corporate bonds have a higher
    default risk and are ____ Canada bonds.
    A) less liquid than
    B) less speculative than
    C) tax-exempt unlike
    D) lower-yielding than
    Answer: A
    Diff: 1 Type: MC Page Ref: 116 - 117
    Skill: Applied
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates

    
    


38. 
    

    Bonds with relatively low risk of default are called ____.
    A) zero coupon bonds
    B) junk bonds
    C) investment grade bonds
    D) fallen angels
    Answer: C
    Diff: 1 Type: MC Page Ref: 114 - 115
    Skill: Recall
    Objective List: 6.1 Describe how default risk, liquidity, and tax considerations affect interest
    rates