Supply and demand in the bond market

Test Bank Financial Markets and Institutions 8th Edition by Frederic S. Mishkin , Stanley Eakins 

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Financial Markets and Institutions 8th Edition by Frederic S. Mishkin , Stanley Eakins Test bank

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Financial Markets and Institutions, 8e (Mishkin)

Chapter 4  Why Do Interest Rates Change?

4.1  Multiple Choice

1) As the price of a bond ________ and the expected return ________, bonds become more attractive to investors and the quantity demanded rises.

A) falls; rises

B) falls; falls

C) rises; rises

D) rises; falls

Answer: A

Topic: Chapter 4.1 Determining Asset Demand

Question Status: Previous Edition

2) The supply curve for bonds has the usual upward slope, indicating that as the price ________, ceteris paribus, the ________ increases.

A) falls; supply

B) falls; quantity supplied

C) rises; supply

D) rises; quantity supplied

Answer: D

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

3) When the price of a bond is above the equilibrium price, there is excess ________ in the bond market and the price will ________.

A) demand; rise

B) demand; fall

C) supply; fall

D) supply; rise

Answer: C

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

4) When the price of a bond is below the equilibrium price, there is excess ________ in the bond market and the price will ________.

A) demand; rise

B) demand; fall

C) supply; fall

D) supply; rise

Answer: A

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

5) When the price of a bond is ________ the equilibrium price, there is an excess supply of bonds and the price will ________.

A) above; rise

B) above; fall

C) below; fall

D) below; rise

Answer: B

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

6) When the price of a bond is ________ the equilibrium price, there is an excess demand for bonds and the price will ________.

A) above; rise

B) above; fall

C) below; fall

D) below; rise

Answer: D

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

7) When the interest rate on a bond is above the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

A) demand; rise

B) demand; fall

C) supply; fall

D) supply; rise

Answer: B

Topic: Chapter 4.3 Changes in Equilibrium Interest Rates

Question Status: Previous Edition

8) When the interest rate on a bond is below the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

A) demand; rise

B) demand; fall

C) supply; fall

D) supply; rise

Answer: D

Topic: Chapter 4.3 Changes in Equilibrium Interest Rates

Question Status: Previous Edition

9) When the interest rate on a bond is ________ the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

A) above; demand; fall

B) above; demand; rise

C) below; supply; fall

D) above; supply; rise

Answer: A

Topic: Chapter 4.3 Changes in Equilibrium Interest Rates

Question Status: Previous Edition

10) When the interest rate on a bond is ________ the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

A) below; demand; rise

B) below; demand; fall

C) below; supply; rise

D) above; supply; fall

Answer: C

Topic: Chapter 4.3 Changes in Equilibrium Interest Rates

Question Status: Previous Edition

11) When the demand for bonds ________ or the supply of bonds ________, interest rates rise.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases

Answer: D

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

12) When the demand for bonds ________ or the supply of bonds ________, interest rates fall.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases

Answer: B

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

13) When the demand for bonds ________ or the supply of bonds ________, bond prices rise.

A) increases; decreases

B) decreases; increases

C) decreases; decreases

D) increases; increases

Answer: A

Topic: Chapter 4.2 Supply and Demand in the Bond Market

Question Status: Previous Edition

14) When the demand for bonds ________ or the supply of bonds ________, bond prices fall.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases