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1. A
a. lower than the par value
b. higher than the par value
c. lower than the discount value
2. Risk of losing a market due to forex change.
a. economic risk
b. market risk
c. transaction risk
Step by step
Solved in 3 steps
- Bond investors prefer short maturities. This is based on: a.default risk b.liquidity risk c.maturity preference d.expectations theoryPlease explain why this statement is (False). Ignoring default risk, if a bond's expected return is greater than its required return, then the bond's market price must be greater than the present value of the bond's cash flows.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
- Which of the following statements is false? A. Other things being equal, an increase in a bond’s maturity will increase its interest rate risk. B. Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk. C. Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk. D. Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.Unsystematic risk is * a.the risk associated with movements in securities prices B.higher when interest rates rise C.the risk of loss of purchasing power D.reduced through diversificationMoney duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True False
- With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to priceDuration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a bond’s full price to a change in its yield. Select one: True FalseWhich of the following is NOT a defining quality of a standard bond cash flow? a) Coupon b) Maturity c) Perpetuity Cash Flow d) Face Value
- The term structure of interest rates is A. None of the options are correct. B. the relationship between the interest rate on a security and its time to maturity. C. the relationship between the rates of interest on all securities. D. the relationship between the yield on a bond and its default rate. E. All of the options are correct.The risk that a bond cannot be sold since the issuer is not well known is called: a.default risk b.interest rate risk c.inflation risk d.liquidity riskwhich of the below has a negative correlation with the return on bonds ? a. Taxability b. Default risk c. Callable bonds d. Liquidity e. Debenture