CHAP5EXO1/ NEED some help with the above. Real interest rate The graphical repre
ID: 2743343 • Letter: C
Question
CHAP5EXO1/ NEED some help with the above.
Real interest rate The graphical representation of the term structure of interest rates for a specified issuer on a given day and currency. Capital gain An implied interest rate that does not reflect an inflation risk premium. Default risk The percentage return generated by an investment, calculated as the cash flows received from the investment (for example, interest or dividend income and capital gains) divided by the purchase price of the investment. Term structure of interest rates The potential for an investment's yield to vary due to changes in the market interest rate and the investor's opportunity cost. Interest rate risk An asset exhibiting less of this attribute can only be sold by: (1) waiting a long time, (2) discounting the price, and/or (3) incurring significant transaction costs. Liquidity Calculated as the difference between a higher selling price and a lower purchase price, this profit results from the appreciation in an asset's value. Market segmentation theory This theory of the term structure of interest rates argues that borrowers and lenders have a preferred maturity for their activities, and the shape of an observed yield curve results from the unique interaction between the supply and demand for funds by these lenders and borrowers in the markets for short- and long-term markets. Yield curve This theory of interest rates argues that the slope of the yield curve reflects the future inflationary expectations of investors, all else being equal. Expectations theory The mathematical relationship between the interest rate and the time to maturity of the debt securities of a given borrower on a given date and denominated in a given currency. Yield The chance that an investment will generate more than one possible return due to the potential for the investment's issuer failure to repay fully its interest or principal-repayment obligations or satisfy the other terms in the investment agreement.Explanation / Answer
Real Interest Rate: Option B.
Capital Gain : Option F.
Default Risk : Option J.
Term Structure of Interest Rates: Option H.
Interest Rate risk : Option I.
Liquidity : Option E.
Market Segmentaion Theory: Option G.
Yield Curve: Option A.
Expectations Theory: Option D.
Yield : Option C.