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Bonds 101: Bond Market Interest Rates

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1.
When an investor has to sell his or her bond at a discount, it usually means _______.
Choose wisely. There is only one correct answer.
Interest rates have risen. The investor must do this to attract buyers, who can get higher rates elsewhere.
2.
If investors expect interest rates to rise for an extended period, the bond market is bullish.
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False. If investors expect interest rates to rise for an extended period, the bond market is bearish because bond prices will fall, indicating a disinterest in bonds.
3.
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.
4.
The longer a bond's maturity, the larger its discount when interest rates rise.
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True. The longer a bond's maturity, the larger its discount when interest rates rise.
5.
The higher a bond's duration, the lower its price risk.
Choose wisely. There is only one correct answer.
False. The higher a bond's duration, the higher its price risk.