Average risk premium on long-term government bonds

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Reference no: EM131611826

The average risk premium on long-term government bonds for the period 1926-2014 was equal to:

1 percent.

zero.

the rate of return on the bonds plus the corporate bond rate.

the rate of return on the bonds minus the inflation rate.

2. the rate of return on the bonds minus the T-bill rate.Which of the following statements is CORRECT?

a. The total yield on a bond is derived from dividends plus changes in the price of the bond.

b. Bonds are riskier than common stocks and therefore have higher required returns.

c. Bonds issued by larger companies always have lower yields to maturity (less risk) than bonds issued by smaller companies.

d. The market value of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.

e. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.

Reference no: EM131611826

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