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Bonds 101: Bond Market Interest Rates

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1.
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.
2.
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.
3.
When bond prices fall, bond yields _______.
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Rise. When bond prices fall, bond yields rise.
4.
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.
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.