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A corporate bond's return becomes less uncertain as default risk increases.
True or False. Explain your answer
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- For the holder of a fixed-rate coupon bond, reinvestment risk is a bigger problem during a period of falling interest rates than during a period of rising interest rates. Why, Explain.Explain why corporate bonds’ default and liquidity premiums are likely to increasewith their maturity.Do bondholders fare better when the yield to maturityincreases or when it decreases? Why?
- Explain how does a bond par value differs from its market value? Are variable rate bonds attractive to investors who expect the interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable rate bonds if it expects interest rates to decrease in the future? Explain.a rise in risk premium will cause bond market prices to rise? true or false?Do bondholders fare better when the yeild to maturity increases or when it decreases? Why?
- If a firm increases its financial risk by selling a large bond issue that increases its financial lewverage explain this assumption?Also what is the relationshipbetween risk and return. Explain with examples bold examples.These are corporate bonds that have a higher rate of return with a higher level of risk? Group of answer choices Revenue bonds Junk bonds GOBs Tax increment bondsWhich one of the following statements is NOT true? As interest rates increase, bond prices increase. Interest rate risk is the risk that bond prices will change as interest rates change. Interest rate changes and bond prices are inversely related. Long-term bonds have more price volatility than short-term bonds of similar risk
- Give typing answer with explanation and conclusion TRUE or FALSE?) The reinvestment risk of a bond happens when the market rates change, we will be reinvesting the cash flows at a different rate than what we expected.An investor believes that a bond may temporarily increase in credit risk. Which of the following would be the most liquid method of exploiting this?a. The purchase of a credit default swap.b. The sale of a credit default swap.c. The short sale of the bond.If the credit quality of the issuer falls sharply, what is your main concern? a.The share price. b.The volatility of the underlying c.The default risk. d.A rise in risk free interest rates Give typing answer with explanation and conclusion