Question 1

Other things held constant, bond prices should increase when inflationary expectations rise.

Accepted Answer

A) True 
 B)False

Question 2

The bonds that are most sensitive to interest rate movements have

Accepted Answer

A)  no coupon and a short-term maturity.
B)  high coupons and a short-term maturity.
C)  high coupons and a long-term maturity.
D)  no coupon and a long-term maturity.E) A) and B)
F) All of the above

Question 3

An insurance company purchases corporate bonds in the secondary market with six years to maturity.Total par value is $55 million.The coupon rate is 11 percent, with annual interest payments.If the expected required rate of return in 4 years is 9 percent, what will the market value of the bonds be then?

Accepted Answer

A)  $52,115,093
B)  $55,341,216
C)  $55,000,000
D)  $56,935,022E) A) and B)
F) C) and D)

Question 4

International diversification of bonds reduces the sensitivity of a bond portfolio to any single country's interest rate movements.

Accepted Answer

A) True 
 B)False

Exam 8: Bond Valuation and Risk

Correct Answer
verified

The bonds that are most sensitive to interest rate movements have

Correct Answer
verified

International diversification of bonds reduces the sensitivity of a bond portfolio to any single country's interest rate movements.

Correct Answer
verified

Other things held constant, bond prices should increase when inflationary expectations rise.

Correct Answer
verified

Exam 8: Bond Valuation and Risk

Correct AnswerverifiedShow Answer

The bonds that are most sensitive to interest rate movements have

Correct AnswerverifiedShow Answer

International diversification of bonds reduces the sensitivity of a bond portfolio to any single country's interest rate movements.

Correct AnswerverifiedShow Answer

Other things held constant, bond prices should increase when inflationary expectations rise.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified