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Bonds 201: Junk Bonds

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1.
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.
2.
The maturity date is the date when a bond is purchased.
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False. The maturity date is the date the bond must be paid.
3.
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.
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.
Junk bonds are less affected by interest rate changes than other bonds because they tend to have longer maturities.
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False. Junk bonds are less affected by interest rate changes than other bonds because they tend to have shorter maturities.