When interest rates move up or down, bond prices move: in the opposite direction

Question

When interest rates move up or down, bond prices move: in the opposite direction in the same direction in the opposite direction and further the longer is the term until maturity a and c As interest rates move up or down and the longer is a bond's term: the bond's price moves in the same direction the more drastic is the movement of the bond's price in the same direction the more drastic is the movement of the bond's price in the opposite direction a and b If a 30-year, $1,000 bond has a 9% coupon and is currently selling for $826, its current yield is: $90 9.0% 10.9% 12.0% Holding all other variables constant as market interest rates increase, bond prices decrease increase remain unchanged None of the above Which of the following would increase risk to the bondholder? A call provision Change in bond rating from A to AAA Secured by specific assets Restrictive covenants Which of the following risks do debt ratings specifically measure? Interest Rate Risk Maturity Risk Default Risk Both b & c All of the above

Explanation / Answer

Answers

3. C

4.C

5.C (1000*9%)/826 = 90/826 = 0.10896 = 10.9%

6.A

7.B

8.E

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