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Bonds 201: Junk Bonds

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1.
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.
2.
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.
3.
Low bond liquidity can lead to lower transaction costs.
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False. Low bond liquidity leads to higher trading costs.
4.
Bonds with the highest grade are rated _______.
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AAA. Bonds least likely to default are graded "AAA."
5.
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.