QUESTION: 97 Exam Topic: 1 Volume A

What is the explanation offered by the liquidity preference theory for the upward sloping yield curve shape?

The long term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.
The long term rates must rise enough to get some borrowers to borrow long-term and some lenders to lend short-term.
The short term rates must rise enough to get some borrowers to borrow short-term and some lenders to lend long-term.
The short term rates must fall enough to get some borrowers to borrow long-term and some lenders to lend short-term.

Answer(s): A

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QUESTION: 98 Exam Topic: 1 Volume A

Which one of the following changes would typically increase the price of a fixed income instrument, such as a bond?

Decrease in inflation rates in a country.
Increase in time to maturity.
Increase in risk premium.
Increase in demand for goods and services.

Answer(s): A

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QUESTION: 99 Exam Topic: 1 Volume A

Changes to which one of the following four factors would typically not increase the cost of credit?

Increasing inflation rates in a country.
Increase in consumption of goods and services.
Higher risk premium on a fixed income instrument.
Higher return earned on alternative investments.

Answer(s): C

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QUESTION: 100 Exam Topic: 1 Volume A

Which of the following factors would typically increase the credit spread?

I) Increase in the probability of default of the issuer.
II) Decrease in risk premium.
III) Decrease in loss given default of the issuer.
IV) Increase in expected loss.

I
II and III
I and IV
I, II, and IV

Answer(s): C

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QUESTION: 97 Exam Topic: 1 Volume A

QUESTION: 98 Exam Topic: 1 Volume A

QUESTION: 99 Exam Topic: 1 Volume A

QUESTION: 100 Exam Topic: 1 Volume A