if inflation is expected to increase quizlet
Conservative, income-oriented bondholders will typically usepromised yield, whereas aggressive bond traders are likely to use expected return.the point in the life of a bond when its price exactly offsets its reinvestment risk.Based on the concept of bond duration, which one of the following statements is correct?Which one of the following bonds would have a duration that exactly matches its time to maturity?The duration of a bond will increase as the time to maturity ________ and/or as the YTM on the bond ________The mathematical link between a bond's price and interest rate changes is theIf the bond market undergoes a large change in yield (for example, more than 100 basis points), then a bond's duration willunderstate the price appreciation when rates fall and overstate the price decline when rates increase.The practical application of bond portfolio immunization to investors is that immunizationallows investors to derive a specified rate of return from bond investments for a given investment horizon.Suppose you sell the 10-year, A-rated 7 percent bonds you own, which are yielding 8 percent, and replace them with an equal amount of 10-year, A-rated 8 percent bonds that are priced to yield 9 percent. During a recession, aircraft assemblers are laid off but they expect to be recalled when the economy improves. If inflation is expected to increase significantly, cautious bondholders should A) expect interest rates to rise. The nominal interest rate will increase. However he underestimated the rate of inflation when they agreed to a repayment and interest schedule. the real rate of return plus a risk premium plus an expected inflation premium.Which one of the following will tend to cause domestic interest rates to rise?The single most important factor that influences the behavior of market interest rates isWhich one of the following statements concerning interest rates is correct?A federal budget surplus will cause interest rates to decline.The yield curve depicts the relationship between a bond's yield to maturity and itsgenerally results from actions by the Federal Reserve to control inflation.require higher long-term interest rates today if they expect higher inflation rates in the future.According to the expectations hypothesis, investors' expectations of decreasing inflation will result inDownward sloping or flat yield curves often indicate Long-term bonds are ________ than short-term bonds.The liquidity preference theory supports ________ yield curves.the yield curve reflects the maturity preferences of financial institutions and investors.Market segmentation theory explains the typical upward sloping shape of yield curves as a function of normally greater demand for short term notes than for long-term bonds.If the yield curve begins to rise sharply, it is usually an indication thatinflation is starting to increase, or is expected to do so in the near future.Evidence indicates that the theory of interest rates with the most predictive power isa combination of expectations, market expectations and liquidity preference.If inflation is expected to increase significantly, cautious bondholders shouldWhich one of the following statements is correct concerning bond investors?Conservative investors buy bonds when interest rates are high.If you are an income-oriented investor and you feel that interest rates are relatively high and will decline in the future, you should purchaseWhich of the following statements concerning the current yield is correct?It is of great interest to conservative bond investors seeking current income.The conventional way to calculate the bond-equivalent yield (BEY) for a bond is tocommonly used for bonds with deferred-call provisions.The value of a bond can be calculated several different ways, depending on the investor's objectives.
expected inflation does not affect the purchasing power of the average consumer. What would the price index equal in 2014?Refer to Exhibit 10-3. What would the price index equal in 2016?Which of the following biases the CPI to underestimate increases in prices?Which of the following does not lead to the CPI underestimating increases in prices?
Which of the following is an example of cyclical unemployment? if inflation increases so will interest rates, if inflation decreases so will interest rates. Consumer price index. what happens when an expected inflation increases or decreases?
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