#1
Which bond pays periodic interest payments?
Fixed-rate bond
ExplanationFixed-rate bonds provide regular interest payments.
#2
What is the term for the risk that interest rates will rise, causing a decline in bond prices?
Interest rate risk
ExplanationInterest rate risk is the risk of declining bond prices due to rising interest rates.
#3
What is the term for the risk that a bond issuer will fail to make interest payments or repay the principal?
Credit risk
ExplanationCredit risk is the risk of bond issuer defaulting on interest payments or principal repayment.
#4
What is the yield to maturity (YTM) of a bond?
The total return anticipated on a bond if it is held until it matures
ExplanationYield to maturity (YTM) is the total anticipated return if a bond is held until maturity.
#5
What does the term 'call provision' mean in the context of bonds?
The right of the issuer to redeem the bonds before maturity
ExplanationCall provision grants the issuer the right to redeem bonds before maturity.
#6
What is the relationship between bond prices and interest rates?
Inverse relationship
ExplanationBond prices and interest rates have an inverse relationship.
#7
What does the term 'duration' measure for a bond?
The sensitivity to interest rate changes
ExplanationDuration measures a bond's sensitivity to interest rate changes.
#8
Which type of bond does not pay regular interest but is instead issued at a discount and redeemed at face value?
Zero-coupon bond
ExplanationZero-coupon bonds do not pay regular interest; they are issued at a discount and redeemed at face value.
#9
What does the term 'credit spread' represent in the context of bonds?
The difference in yields between different credit qualities
ExplanationCredit spread is the difference in yields between different credit qualities.
#10
What does the term 'coupon rate' refer to in the context of bonds?
The annual interest payment as a percentage of the bond's face value
ExplanationCoupon rate is the annual interest payment as a percentage of the bond's face value.
#11
Which of the following bonds allows the issuer to repay the debt before maturity?
Callable bond
ExplanationCallable bonds allow the issuer to repay the debt before maturity.
#12
What is a yield curve?
A graph showing the relationship between bond yields and maturities
ExplanationA yield curve shows the bond yield-maturity relationship.
#13
What is a bond indenture?
A legal document outlining the terms and conditions of a bond
ExplanationA bond indenture is a legal document specifying bond terms and conditions.
#14
In which market do Treasury bonds primarily trade?
Secondary market
ExplanationTreasury bonds primarily trade in the secondary market.
#15
What is the primary factor affecting the price sensitivity of a bond to interest rate changes?
Maturity
ExplanationMaturity is the primary factor affecting a bond's price sensitivity to interest rate changes.