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Bonds 101: Bond Market Interest Rates

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1.
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.
2.
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.
3.
The higher a bond's duration, the lower its price risk.
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False. The higher a bond's duration, the higher its price risk.
4.
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.
5.
When bond prices fall, bond yields _______.
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Rise. When bond prices fall, bond yields rise.