|
LOS a: Explain the risks associated with investing in bonds.
Q1. The interest rate risk of a bond is the:
A) risk that arises from the uncertainty about the bond's return caused by changes in interest rates over time.
B) risk related to the possibility of bankruptcy of the bond's issuer.
C) risks related to the possibility of bankruptcy of the bond's issuer and that arises from the uncertainty of the bond's return caused by the change in interest rates.
Q2. Which of the following situations lead to short-term profit opportunities in the bond market?
A) Interest rates become more volatile.
B) Inflation is expected to rise.
C) Yields of all maturities start to rise.
Q3. Biggs, Inc., holds a bond portfolio that is, on average, trading below par value. They have faced some cash flow problems of late and have used the bond interest payments for operating expenses. The bonds are callable. Given the current situation, Biggs faces which types of risk?
A) Interest rate risk.
B) Interest rate risk and call risk.
C) Call risk.
| 
发表于 2009-3-2 15:14
| 
