6．With respect to bond investing, reinvestment risk is a very important component of what other type of risk?

A)   Default risk.

B)   Call risk.

C)   Liquidity risk.

D)   Downgrade risk.

7．When planning to hold a coupon-paying Treasury bond until maturity, which of the following types of risk would be the most important?

A)   Default.

B)   Reinvestment.

C)   Downgrade.

D)   Interest rate.

8．Credit risk is measured in several ways. The yield differential above the return on a benchmark security measures the:

A)   default risk.

B)   downgrade risk.

C)   recovery rate.

D)   credit spread risk.

答案和详解如下：

6．With respect to bond investing, reinvestment risk is a very important component of what other type of risk?

A)   Default risk.

B)   Call risk.

C)   Liquidity risk.

D)   Downgrade risk.

The correct answer was B)

Call risk is composed of three components: the unpredictability of the cash flows, the compression of the bond’s price, and the high probability that when the bond is called the investor will be faced with less attractive investment opportunities. This latter risk is reinvestment risk. Reinvestment risk is not a directly related to any of the other choices.

7．When planning to hold a coupon-paying Treasury bond until maturity, which of the following types of risk would be the most important?

A)   Default.

B)   Reinvestment.

C)   Downgrade.

D)   Interest rate.

The correct answer was B)

Since it is a Treasury bond, downgrade and default risk are not relevant. Interest rate risk is not important because the investor plans to hold the bond until maturity. Reinvestment risk is the most important. The investor will have to worry about the rates at which he/she will be able to reinvest the coupons over the life of the bond and the principal upon maturity.

8．Credit risk is measured in several ways. The yield differential above the return on a benchmark security measures the:

A)   default risk.

B)   downgrade risk.

C)   recovery rate.

D)   credit spread risk.

The correct answer was D)

The yield differential above the return on a benchmark security measures the credit spread risk. Credit spread risk is also known as the risk premium or spread.