A bond that had a 20-year original maturity with 1 year left to maturity has more price risk than a 10-year original maturity bond with 1 year left to maturity. (Assume that the bonds have equal default risk and equal coupon rates, and they cannot be called.)       True       False

Longer maturity bonds have low Blank 1 risk but high Blank 2 risk, while higher coupon bonds have a lower level of Blank 3 risk and a higher level of Blank 4 risk. To account for the effects related to both a bond's maturity and coupon, many analysts focus on a measure called duration, which is the Blank 5 of the time it takes to receive each of the bond's cash flows.

Explain "bond price elasticity." Do zero-coupon or high-coupon bonds with the same yield to maturity have a stronger price sensitivity? Why? What does this mean for the market value volatility of zero-coupon Treasury bonds in mutual funds?

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What is a bond’s market value when the required rate of return (ie market rate) is less than the coupon rate? The bond’s market value is less than the par value. The bond’s market value is the same as the par value. The bond’s market value is greater than the par value. None of the above.

Which are TRUE about the inverse relationship between price and yield: a. when interest rates rise; bond prices fall b. interest rates have no effect on the price of a zero-coupon bond c. when yields go up; prices go down d. the yield on a 30-year bond goes up when interest rates go up

5. Bond yields Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? O The bond will not be called. O The bond has an early redemption feature. Consider the case of Demed Inc.: Demed Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,040.35. However, Demed Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Demed Inc.'s bonds? Value YTC If interest rates are expected to remain constant, what is the best estimate of the remaining life left for Demed Inc.'s bonds? O 18 years O 5…

A bond does not pay out regular interest. This means that *a. This is a bad investment.b. It is unsecured.c. It is a junk bond.d. It is a zero-coupon bond.

A bond with short maturity has less "interest rate risk" than a bond with long maturity when all other features—coupon interest rate, par value, and interest payment frequency—are the same. TRUE              FALSE

Select all of those that are correct:   A) prices of zero coupon bonds increase as the time to maturity decreases.   B) prices of zero coupon bonds increase as the time to maturity increases.   C) prices of zero coupon bonds converge to the bond's face value as maturity approaches.   D) prior to maturity, the price of a zero coupon bond is less than the bond's face value