#1
Which of the following factors affects bond prices?
Credit rating of the issuer
Market interest rates
Inflation expectations
All of the above
#2
What is the risk of default called in bond investing?
Interest rate risk
Credit risk
Liquidity risk
Inflation risk
#3
What is the relationship between bond prices and interest rates?
Inverse
Direct
No relationship
Depends on the type of bond
#4
What is the term used to describe a bond's stated interest rate?
Coupon rate
Yield to maturity
Face value
Market price
#5
What is the primary determinant of a bond's credit risk?
The bond's coupon rate
The bond's yield to maturity
The bond issuer's credit rating
The bond's face value
#6
What is the formula for calculating the present value of a bond?
PV = C / (1 + r)^n
PV = C * (1 - (1 + r)^-n) / r
PV = C * (1 + r)^n
PV = C / r
#7
What does duration measure in bond valuation?
The time it takes for a bond to mature
The sensitivity of bond price to changes in interest rates
The annual interest payment of a bond
The total return of a bond investment
#8
What does the term 'yield to maturity' (YTM) represent?
The annual interest payment of a bond
The total return of a bond investment
The rate of return anticipated on a bond if it is held until maturity
The current market price of a bond
#9
What is the formula for calculating the yield to maturity (YTM) of a bond?
YTM = (Annual Interest Payment / Current Market Price) * 100%
YTM = (Annual Interest Payment / Face Value) * 100%
YTM = (Face Value / Current Market Price) * 100%
YTM = (Annual Interest Payment / Coupon Rate) * 100%
#10
Which type of bond pays interest at regular intervals but returns the principal only at maturity?
Zero-coupon bond
Callable bond
Sinking fund bond
Bullet bond
#11
Which bond has a higher duration?
A zero-coupon bond with a maturity of 10 years
A coupon bond with a maturity of 10 years
Both have the same duration
Cannot be determined
#12
What is the main advantage of using duration as a measure of interest rate risk?
It accounts for changes in market interest rates
It is easy to calculate
It is unaffected by changes in bond prices
It represents the total return of a bond investment
#13
What is the primary function of bond duration in risk management?
To measure the sensitivity of bond prices to changes in interest rates
To calculate the total return of a bond investment
To assess the creditworthiness of bond issuers
To estimate the future market price of a bond
#14
What does the term 'convexity' refer to in bond valuation?
The shape of the bond's yield curve
The curvature of the bond price-yield relationship
The stability of bond prices
The rate of change of bond prices relative to changes in interest rates
#15
What is the purpose of bond portfolio immunization?
To eliminate all risks associated with bond investments
To protect the bond portfolio against changes in interest rates
To maximize the yield of the bond portfolio
To increase the duration of individual bonds in the portfolio