HO_MB3e_IM_Ch5

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1、Chapter5 TheRiskStructureandTermStructureofInterestRates  71Chapter5TheRiskStructureandTermStructureofInterestRatesn BriefChapterSummaryandLearningObjectives5.1TheRiskStructureofInterestRates(pages140–152)Explainwhybondswiththesamematuritycanhavedifferentinterestrates.·Bondst

2、hathavethesamematuritymaydifferwithrespecttoothercharacteristicsthatinvestorsbelieveareimportant,suchasrisk,liquidity,informationcosts,andtaxation.·Bondswithmorefavorablecharacteristicshavelowerinterestratesbecauseinvestorsarewillingtoacceptlowerexpectedreturnsonthosebonds.5.

3、2TheTermStructureofInterestRates(pages152–167)Explainwhybondswithdifferentmaturitiescanhavedifferentinterestrates.·Theliquiditypremiumtheory,themostcompletetheoryofthetermstructure,holdsthattheinterestrateonalong-termbondisanaverageoftheinterestratesinvestorsexpectonshort-ter

4、mbondsoverthelifetimeofthelong-termbond,plusatermpremiumthatincreasesinvaluethelongerthematurityofthebond.·Theslopeoftheyieldcurveshowstheshort-terminterestratesthatbondmarketparticipantsexpectinthefutureandcanbeusedtohelpforecastinflationandeconomicactivity.Copyright©2018Pea

5、rsonEducation,Inc.Chapter5 TheRiskStructureandTermStructureofInterestRates  71n KeyTermsBondrating,p.141.Asinglestatisticthatsummarizesaratingagency’sviewoftheissuer’slikelyabilitytomaketherequiredpaymentsonitsbonds.Defaultrisk(orcreditrisk),p.141.Theriskthatabondissuerwillfa

6、iltomakepaymentsofinterestorprincipal.Expectationstheory,p.155.Atheoryofthetermstructureofinterestrateswhichholdsthattheinterestrateonalong-termbondisanaverageoftheinterestratesinvestorsexpectonshort-termbondsoverthelifetimeofthelong-termbond.Liquiditypremiumtheory(orpreferre

7、dhabitattheory),p.162.Atheoryofthetermstructureofinterestratesthatholdsthattheinterestrateonalong-termbondisanaverageoftheinterestratesinvestorsexpectonshort-termbondsoverthelifetimeofthelong-termbondplusatermpremiumthatincreasesinvaluethelongerthematurityofthebond.Municipalb

8、onds,p.149.Bondsissuedbystateandlocalgovernments.Riskstructureofinte