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Bonds 201: Junk Bonds

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1.
Interest rates tend to be less important than company earnings to the price of a junk bond.
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True. Junk bond prices tend to be more affected by company revenues than interest rates.
2.
When inflation is high, bond prices _______.
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Decrease. When inflation goes up, bond prices decrease to be more attractive to buyers.
3.
Bonds with the highest grade are rated _______.
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AAA. Bonds least likely to default are graded "AAA."
4.
The process of investing in many different types of bonds is called diversification.
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True. Diversification involves choosing securities that involve a wide variety of different aspects, such as risk levels and types of issuers.
5.
Credit analysis includes researching a company's entire industry.
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True. Looking at other companies in the same industry is part of credit analysis.