Davidson; Management - 3rd Australasian Edition



1.
The coupon rate may be the market rate of interest for a bond.
A. True
B. False


2.
The price of a bond and the market rate of interest are inversely related.
A. True
B. False


3.
The price of a bond is the present value of future payments discounted at the coupon rate.
A. True
B. False


4.
Yield to maturity assumes reinvestment of coupons at the same yield.
A. True
B. False


5.
If market interest rates have increased since a bond was purchased, price risk will increase the price of the bond and reinvestment risk will decrease the return on the coupons.
A. True
B. False


6.
A zero coupon bond has no reinvestment risk.
A. True
B. False


7.
Price risk is a measure of bond volatility.
A. True
B. False


8.
Short-term bonds have greater price risk compared to long-term bonds.
A. True
B. False


9.
Price risk is of no concern to the investor if the bond is held to maturity.
A. True
B. False


10.
Duration is a measure of interest rate volatility.
A. True
B. False


11.
The duration of a zero coupon bond equals the term to maturity of the bond.
A. True
B. False


12.
If the coupon rate equals the market rate, a bond is likely to be selling at a discount.
A. True
B. False


13.
The coupon rate varies inversely with bond prices.
A. True
B. False


14.
Duration matching eliminates risk.
A. True
B. False


15.
A zero-coupon bond bears no interest.
A. True
B. False


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