Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions. This theory is called the
A. ANSWER Expectations hypothesis
B. Segmentation theory
C. Liquidity premium theory
D. Theory of industry supply and demand for bonds
A corporation’s board of directors:
A. Is selected by and can be removed by management
B. ANSWER Can be voted out by power by the shareholders
C. Has a life time appointment to the board
D. Is selected by a vote of all corporate stakeholders
15. What is your monthly mortgage payment on a loan for $150,000, at 6% for 20 years?
ANSWER: $1,074.65
I used my TI-83 calculator. N=20*12; I%=6%/12; PV=150,000; PMT=0; FV=0
solve for PMT = -1074.646...the negative represents a cash outflow.
It's also known as "yield curve."
Incomplete post
The theory that suggests that the term structure of interest rates is determined by the behavior of various types of financial institutions is called the C. Liquidity premium theory.
The answer to the first question is C. Liquidity premium theory.
To arrive at this answer, one can go through the process of elimination by considering each option and understanding its meaning:
A. Expectations hypothesis: This theory suggests that the term structure of interest rates is determined by expectations of future interest rates. It does not directly relate to the behavior of financial institutions, so it can be eliminated.
B. Segmentation theory: This theory argues that the term structure of interest rates is determined by the preferences and behavior of different investor groups. While it does involve certain types of financial institutions, it does not encompass all types, so it can be eliminated as well.
C. Liquidity premium theory: This theory states that the term structure of interest rates reflects the extra interest payment required by investors for owning longer-term securities rather than shorter-term ones. It takes into account the behavior of various financial institutions, making it the most suitable answer.
D. Theory of industry supply and demand for bonds: This theory focuses on the supply and demand dynamics of bonds within specific industries, not the behavior of financial institutions. Hence, this option can be ruled out.
For the second question, the answer is B. The board of directors can be voted out by the power of the shareholders. This option aligns with the commonly known corporate governance structure where shareholders have the ability to influence the composition of the board by voting.
Finally, for the third question, you used a TI-83 calculator to find the monthly mortgage payment. By plugging in the values of N (the number of periods), I% (interest rate per period), PV (present value or loan amount), PMT (monthly payment), and FV (future value), you obtained a monthly mortgage payment of $1,074.65. The negative sign represents a cash outflow because it represents the payment made by the borrower.