LOS b: Describe the factors that have been observed to drive U.S. Treasury security returns, and evaluate the importance of each factor.

Q1. Change in the which of the following factors has been observed to be the most important driving force for Treasury returns?

A)   Level of interest rates.

B)   Slope of the yield curve.

C)   Coupon of Treasury securities.

Q2. Change in which of the following is NOT a factor that has been observed to drive Treasury returns?

A)   The coupon of Treasury securities.

B)   The level of interest rates.

C)   The curvature of the yield curve.

Q3. Research studies have identified three factors that explain historical Treasury returns. Which of the following is the factor with the most explanatory power? Changes in the:

A)   slope of the yield curve.

B)   level of interest rates.

C)   default risk premium.

Q4. Changes in all of the following have been identified as one of the three factors that explain historical Treasury returns EXCEPT the:

A)   curvature of the yield curve.

B)   default risk premium.

C)   level of interest rates.

[此贴子已经被作者于2009-3-17 17:43:09编辑过]

LOS b: Describe the factors that have been observed to drive U.S. Treasury security returns, and evaluate the importance of each factor. fficeffice" />

Q1. Change in the which of the following factors has been observed to be the most important driving force for Treasury returns?

A)   Level of interest rates.

B)   Slope of the yield curve.

C)   Coupon of Treasury securities.

Correct answer is A)

In regressions, changes in the level of the interest rate have been shown to explain about 90% of the Treasury return variance.

Q2. Change in which of the following is NOT a factor that has been observed to drive Treasury returns?

A)   The coupon of Treasury securities.

B)   The level of interest rates.

C)   The curvature of the yield curve.

Correct answer is A)

The coupon for Treasury securities is constant.

Q3. Research studies have identified three factors that explain historical Treasury returns. Which of the following is the factor with the most explanatory power? Changes in the:

A)   slope of the yield curve.

B)   level of interest rates.

C)   default risk premium.

Correct answer is B)

Default risk is not relevant for Treasury securities. Changes in the level of interest rates accounts for almost 90% of the observed variation in total returns.

Q4. Changes in all of the following have been identified as one of the three factors that explain historical Treasury returns EXCEPT the:

A)   curvature of the yield curve.

B)   default risk premium.

C)   level of interest rates.

Correct answer is B)

Default risk is not relevant for Treasury securities. Research has identified the curvature of the yield curve, level of interest rates, and the slope of the yield curve as explaining over 95% of the changes in Treasury returns.

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