#1
Which of the following is used to calculate the present value of future cash flows from a bond?
Discount Rate
Coupon Rate
Yield to Maturity
Face Value
#2
A bond with a higher coupon rate will generally have:
Lower price and higher interest rate risk
Higher price and higher interest rate risk
Higher price and lower interest rate risk
Lower price and lower interest rate risk
#3
Which term refers to the interest rate that investors demand for investing in a bond?
Coupon Rate
Yield to Maturity
Face Value
Par Value
#4
What does the term 'par value' represent for a bond?
The value of the bond at maturity
The face value of the bond
The current market price of the bond
The yield to maturity of the bond
#5
What is the primary risk associated with investing in bonds?
Market risk
Credit risk
Liquidity risk
Inflation risk
#6
What is the term used to describe the risk that an issuer will fail to make timely payments of interest and principal?
Market risk
Credit risk
Interest rate risk
Liquidity risk
#7
Which of the following bond types carries the highest interest rate risk?
Short-term bonds
Zero-coupon bonds
Callable bonds
Long-term bonds
#8
What is the relationship between bond prices and interest rates?
Bond prices and interest rates move inversely
Bond prices and interest rates move in the same direction
Bond prices have no relationship with interest rates
Bond prices depend solely on inflation rates
#9
What is the formula to calculate the price of a bond?
Face Value / (1 + Yield to Maturity)
Coupon Payment * Discount Rate
Coupon Payment / Yield to Maturity
Present Value of Coupons + Present Value of Face Value
#10
If a bond's yield to maturity is higher than its coupon rate, what is likely true about its price?
It will be at a premium
It will be at a discount
It will be at par
It cannot be determined
#11
What is the impact of a credit rating downgrade on bond prices?
Bond prices increase
Bond prices decrease
No impact on bond prices
Impact depends on market sentiment
#12
Which bond valuation method assumes that all future cash flows from the bond will be reinvested at the yield to maturity?
Net Present Value (NPV)
Discounted Cash Flow (DCF)
Internal Rate of Return (IRR)
Yield to Maturity (YTM)
#13
Duration is a measure of a bond's:
Sensitivity to changes in interest rates
Future cash flows
Face value
Coupon payments
#14
What does a higher duration indicate about a bond's sensitivity to interest rate changes?
Higher sensitivity
Lower sensitivity
No sensitivity
Depends on coupon rate
#15
What does a bond's convexity measure?
Its sensitivity to interest rate changes
Its sensitivity to changes in inflation
The curvature of its price-yield relationship
The bond's credit risk
#16
What is the primary factor that determines a bond's coupon rate?
The issuer's credit rating
The bond's market price
The bond's yield to maturity
The issuer's cost of debt
#17
What does a negative convexity imply for a bond?
Higher price sensitivity to interest rate changes
Lower price sensitivity to interest rate changes
Decreasing coupon payments over time
Increasing coupon payments over time
#18
What is the primary purpose of using duration as a measure of interest rate sensitivity?
To predict future interest rate movements
To calculate the bond's present value
To measure the bond's volatility
To estimate the bond's price change in response to interest rate changes