#1
What happens to bond prices when interest rates rise?
Bond prices fall
ExplanationEffect of rising interest rates on bond prices.
#2
What does the term 'coupon rate' refer to in the context of bonds?
The interest rate at which a bond pays interest
ExplanationDefinition of coupon rate.
#3
What does the term 'par value' represent for a bond?
The face value or principal amount of the bond
ExplanationDefinition of par value for bonds.
#4
Which of the following is NOT a factor in determining a bond's credit risk?
Coupon rate
ExplanationNon-contributing factor to bond credit risk.
#5
What is the term for the date on which the principal amount of a bond is repaid to the investor?
Maturity date
ExplanationDefinition of bond maturity date.
#6
What is the term for the process of spreading investment across different assets to reduce risk?
Portfolio diversification
ExplanationDefinition of portfolio diversification.
#7
Which of the following represents the correct formula for calculating the present value of a bond?
PV = C / (1 + r)^n
ExplanationPresent value formula of a bond.
#8
What does a bond's yield to maturity (YTM) represent?
The rate of return anticipated on a bond if it is held until it matures
ExplanationYield to maturity definition.
#9
Which of the following factors does NOT typically affect bond prices?
Geographic location of the bond issuer
ExplanationNon-influential factor on bond prices.
#10
Which term describes the change in bond prices resulting from a change in interest rates?
Interest rate risk
ExplanationTerm for bond price changes due to interest rate change.
#11
Which of the following is NOT a type of bond yield?
Face yield
ExplanationNon-existent bond yield type.
#12
What does the term 'call provision' refer to in the context of bonds?
A provision that allows the issuer to redeem the bond before maturity
ExplanationDefinition of call provision.
#13
Which bond has the highest interest rate risk?
A long-term bond with a low coupon rate
ExplanationBond with highest interest rate risk.
#14
What is the relationship between bond prices and bond yields?
Inverse relationship
ExplanationRelationship between bond prices and yields.
#15
What is the key determinant of a bond's price volatility?
Maturity date
ExplanationPrimary factor affecting bond price volatility.
#16
What does a bond's duration measure?
Its sensitivity to interest rate changes
ExplanationDefinition of bond duration.
#17
Which type of bond has its interest payments adjusted for inflation?
Inflation-linked bond
ExplanationCharacteristics of inflation-linked bonds.
#18
What is the term for the ratio of risk to return of an investment?
Sharpe ratio
ExplanationDefinition of Sharpe ratio.