1. The segmented markets theory:
1) explains upward-sloping yield curves as a result of the demand for long-term bonds being high, relative to the demand for short-term bonds
2) explains upward-sloping yield curves as a result of the demand for long-term bonds being low, relative to the demand for short-term bonds
3) explains upward-sloping yield curves as a result of the favourable tax treatment of long-term bonds
4) is unable to explain upward-sloping yield curves
2. Which of the following best describes a credit default swap?
(a) The right to sell a reference entity if a credit event occurs
(b) An agreed exchange of repayments on currency loans
(c) An exchange of fixed for floating payments on a notional principal
(d) The pooling of emerging market debt (e) A futures position to hedge foreign currency exposure