Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (148.08 KB, 2 trang )
Question #1 of 6
A) Restrictive Expansive
Explanation
The key piece of data here is the fact that the yield curve is flat. When fiscal policy is expansive
but monetary policy is restrictive, the yield curve is more or less flat.
Question #2 of 6
A) 3.15%.
Explanation
To calculate the target interest rate, use the following equation. Target rate = neutral rate + 0.5 ×
(expected GDP - GDP trend) + 0.5 × (expected inflation - target inflation). Target rate = 3.57% +
0.5 × (3.84% - 3.27%) + 0.5 × (0.6% - 2.0%) = 3.15%.
Question #3 of 6
A) Interest rates will increase.
Explanation
Inflation has been 1.3% and Jones is forecasting 0.6%. If Jones is wrong and inflation rises to
2%, the central bank will need to increase short-term rates, which is often associated with a
general increase in interest rates and a decline in bond prices. The link to stock prices is much
less certain, so that is not as good an answer.
Question #4 of 6
A) Increase duration.
Explanation
Jones projects a target short-term interest rate of 3.15% (see Question 2), lower than the current
rate. To take advantage of the likely rate reduction, bond managers should increase duration.
With a higher duration the bonds will appreciate more in price when rates fall. This assumes