Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
Why might high-yield bond funds suffer greatly in an economic slowdown?
Their issuers might not be able to pay interest or principal. The bonds these funds own pay high yields because there is risk that the companies backing them won't be able to meet their obligations. Such defaults are most likely to crop up in a tougher economic environment.
2.
When shopping for a junk-bond fund, credit quality is the feature you should be concerned with.
True. Credit risk is the big risk with these funds, so an investor should be most concerned with the credit quality of the underlying bonds.
3.
How do bank loan funds' fees compare to the fees of the average bond fund?
They are higher. Compared to the average bond fund, their fees are higher.
4.
Why do bank loan funds have high credit risk?
The loans in the funds are from low-quality companies. Low-quality companies typically carry high risk of default.
5.
Treasury inflation-protected securities are issued by _______.
The U.S. government. Because they are issued by Uncle Sam, they are considered very safe.
