Bond Valuation and Risk Management Quiz

All the mentioned factors (interest rates, time to maturity, and credit risk) affect bond prices.

The risk of default in bond investing is called credit risk.

Bond prices and interest rates have an inverse relationship.

The term used to describe a bond's stated interest rate is coupon rate.

The primary determinant of a bond's credit risk is the bond issuer's credit rating.

Present value of a bond is calculated using the formula PV = C * (1 - (1 + r)^-n) / r.

Duration measures the sensitivity of bond prices to changes in interest rates in bond valuation.

Yield to maturity (YTM) represents the anticipated rate of return on a bond if held until maturity.

The formula for calculating the yield to maturity (YTM) of a bond is YTM = (Annual Interest Payment / Face Value) * 100%.

A bullet bond pays interest at regular intervals but returns the principal only at maturity.

A zero-coupon bond with a longer maturity (10 years) has a higher duration.

Duration as a measure of interest rate risk accounts for changes in market interest rates.

The primary function of bond duration in risk management is to measure the sensitivity of bond prices to changes in interest rates.

Convexity in bond valuation refers to the curvature of the bond price-yield relationship.

The purpose of bond portfolio immunization is to protect the bond portfolio against changes in interest rates.