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Bonds 101: Bond Market Interest Rates

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1.
A continuous rise in bond prices indicates a bullish market.
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True. It is accompanied by falling interest rates.
2.
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.
3.
When interest rates fall, bond prices _______.
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Rise. Because rates on existing bonds may be higher than bonds issued with the lowered rates, owners of existing bonds can sell theirs for a profit.
4.
When bond prices fall, bond yields _______.
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Rise. When bond prices fall, bond yields rise.
5.
When interest rates fall, assuming an equal amount for all bond maturities, bonds with short maturities will have _______.
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Smaller premiums than bonds with longer maturities. Short maturities mean small discounts.