1. Other things equal, an increase in the tax on dividends is likely to result in all of the following EXCEPT:
- lower interest rates
- increased demand for bonds
- higher interest rates
- higher expected return on bonds relative to stocks
2. The formula for the yield to maturity, i, on a discount bond is
- i = (Discount price - Face value)/Discount price.
- i = (Face value - Discount price)/Face value.
- i = (Discount price - Face value)/Face value.
- i = (Face value - Discount price)/Discount price.
3. The bond supply curve slopes up because
- when bond prices are high, inflation is high.
- the lender is willing and able to offer more bonds
- when the price of the bond is low. interest rates rise as bond prices rise.
- the borrower is willing and able to offer more bonds when the price of the bond is high.
4. The demand curve for bonds would be shifted to the left by
- a decrease in the information costs of bonds relative to other assets.
- a decrease in expected inflation.
- an increase in expected returns on other assets.
- an increase in the liquidity of bonds relative to other assets.
5. Which of the following would NOT cause the demand curve for bonds to shift?
- a change in expected inflation
- a change in the price of bonds
- a change in wealth
- a change in the liquidity of bond