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Bonds 101: Bond Market Interest Rates

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1.
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.
2.
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.
3.
Stock and bond values sometimes change in opposite directions.
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True. This can be the result of trends in the financial health of companies.
4.
If interest rates rise 2 percent and a bond's duration is 10 years, you can expect _______.
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The bond's price to fall 20 percent. If interest rates rise 2 percent and a bond's duration is 10 years, you can expect the bond's price to fall 20 percent.
5.
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.