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Bonds 201: Junk Bonds

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1.
Default loss rates measure the change in a bond's _______ due to a default.
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Price. Default loss rates measure the impact of a default on a bond's price.
2.
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.
3.
The debt-to-equity ratio measures a company's debt compared to its _______.
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Stock value. The debt-to-equity ratio is the ratio between a company's debt and its stock value.
4.
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.
5.
When inflation is high, bond prices _______.
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Decrease. When inflation goes up, bond prices decrease to be more attractive to buyers.