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1.
The higher a bond's duration, the lower its price risk.
False. The higher a bond's duration, the higher its price risk.
2.
Stock and bond values sometimes change in opposite directions.
True. This can be the result of trends in the financial health of companies.
3.
When interest rates fall, bond investors can potentially make a profit by _______.
Selling bonds. If their bonds pay a higher interest rate than newly issued bonds would, the investors could find their bonds in great demand and thus sell them for a profit.
4.
When interest rates fall, bond prices _______.
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.
5.
Changing interest rates affect bonds with different maturities to the same degree.
False. Changing interest rates affect bonds with varying maturities differently.