Why is the interest rate on a U.S. Treasury bond usually less than that on a corporate bond? What factors affect the interest rate paid on a bond?

Define: default risk, default premium, liquidity risk, and liquidity premium. During the late 1970s, Michael Milken convinced many investors that the yields on junk bonds more than compensated for their higher default risk. What do you think happened to the liquidity of these bonds as a result?

At the start of the recession in 2000, interest rates on lower-rated corporate bonds rose relative to the interest rate on Treasury bonds. Why did this happen? Why did it happen? What is this phenomenon called?

Explain the significance of Moody's, MorningStar, and Standard & Poors to the financial system. How are they related to Underwriters Laboratories?

Define: Segmented Markets, Expectations, and Preferred Habitat theories. Explain what each predicts about the slope of the yield curve. Explain the argument that inverted yield curves can precede recession? (Here is the living yield curve.)

Countries with lower real interest rates have more development in those things that require long-term commitments. Would Bohm-Bawerk agree? Explain.

Mortgage foreclosure rates soared 53 percent in August, compared with a year earlier, and many people who were eager to buy a house with low "teaser" interest rates and creative financing are in trouble. Writing for the Acton Institute, Senior Fellow in Economics Jennifer Roback Morse expects new calls for goverment oversight of the mortgage industry, which is already highly regulated. A better idea, she suggests, would be for buyers to examine their motives for acquiring real estate with gimmicky loans and take some responsibility for their actions.

Define: nominal yield, current yield, and yield to maturity.

Define nominal and real interest rates. Why might the actual real interest rate differ from the expected real interest rate? Would this possible difference be of more concern to you if you were considering making a loan to be paid back in one year or a loan to be paid back in 10 years?

Consider Irving Fisher. (Literally.) Explain the Fisher Hypothesis. Under what circumstances would the lender benefit in terms of purchasing power when interest rates and inflation rates differ?

What is the Prime Rate and the London Interbank Offer Rate.

When a bond is exchanging hands in the bond market, we are seeing two goods being exchanged: the bond and the use of funds. Explain.

What factors affect bond demand and supply? Why does the bond supply curve slope up and the bond demand curve slope down in the bond market diagram?

How is the bond market related to the loanable funds market? If bond prices are currently above equilibrium, what can we infer about the pressure on interest rates in the loanable fund market?

Here is some salary data pertaining to various business and non-business majors. As usual, the economists fare quite well.