nterest rate risk refers to changes in the bond's ______________ (coupon rate, credit rating, par value, or yield to maturity) , whereby a decrease in that item causes bond values to ___________ (increase, decrease, vary randomly, or remain constant )
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Interest rate risk refers to changes in the bond's ______________ (coupon rate, credit rating, par value, or yield to maturity) , whereby a decrease in that item causes bond values to ___________ (increase, decrease, vary randomly, or remain constant )
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- Interest Rate risk depends upon how sensitive the bond price is to interest rate changes (i.e., maturity and coupon rate). T/F) is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. O Convexity Maturity Duration ImmunizationExplain why modified duration a better measure is than maturity when calculating the bond’s sensitivity to changes in interest rates?
- ( ) is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. a.Convexity b.Maturity c.Duration d.ImmunizationAs interest rates, and consequently investors' required rates of return, change over time, the ________ of outstanding bonds will also change. a. price b. par value c. coupon interest payment d. maturity dateInterest-rate risk results from: Answer a. Bond prices being fixed over the life of the bond b. Inflation being uncertain c. A mismatch between an individual investment horizon and a bond maturity d. The fact that most people hold bonds until they mature
- Changes in yield-to-maturity (YTM) produce market price risk and reinvestment risk. A __________ in yield-to-maturity (YTM) increases a bond’s price and __________ its reinvestment risk. A. decrease / decrease B. decrease / increase C. increase / increase D. increase / decreasea bonds interest rate risk is lower if the bond has a _____ maturity and a ____ coupon rateInterest rate risk; a.is lesser for bonds with a longer term as compared to bonds with a shorter term b.is the risk that the market interest rate may remain constant c.is the risk that a bond's coupon rate may change over time d.is zero on the date of maturity of a bond
- Interest-rate risk results from: a. Bond prices being fixed over the life of the bond b. Inflation being uncertain c. A mismatch between an individual's investment horizon and a bond's maturity d. The fact that most people hold bonds until they matureWhat does duration tell you about the sensitivity of a bond portfolio to interest rates. What are the limitations of the duration measure?Under what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.