1. According to the expectations theory of the term structure of interest rates,
a. investors prefer holding short-term securities.
b. the shape of the yield curve is determined by investors' expectations of future short-term interest rates.
c. institutional investors' maturity preferences determine the shape of the yield curve.
d. investors always expect short-term interest rates to increase.
2. Which of the following statements is true about bonds?
a. The higher the coupon rate, the shorter the duration.
b. The yield on a bond is usually fixed.
c. A bond's coupon rate is equal to its face value.
d. Most bonds pay interest annually.