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Bonds 101: Bond Market Interest Rates

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1.
Duration is used to predict how much bond prices will change due to fluctuating interest rates.
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True. Duration takes into account the weighted average of a bond's coupon rates, its principal, and the time until the rates are paid.
2.
A continuous rise in bond prices indicates a bullish market.
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True. It is accompanied by falling interest rates.
3.
Changing interest rates affect bonds with different maturities to the same degree.
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False. Changing interest rates affect bonds with varying maturities differently.
4.
When an investor has to sell his or her bond at a discount, it usually means _______.
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Interest rates have risen. The investor must do this to attract buyers, who can get higher rates elsewhere.
5.
The lower a bond's credit risk, the higher its yield.
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False. The lower a bond's credit risk, the lower its yield. Low-risk bonds generally pay less interest than those that carry higher risk.