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1.
High-yield bonds will do poorly when _______.
There's a recession. Lower-rated high-yield bonds will do poorly during a recession, as issuers will have a tougher time meeting their high debt payments.
2.
Why are corporate bonds riskier than government bonds?
They carry a higher risk of default. Because they are issued by companies rather than governments, they have a higher risk of default. A government has a very low risk of default.
3.
What does duration measure?
A bond's sensitivity to interest rates. The higher a bond's duration, the more it responds to changes in interest rates.
4.
The higher a bond's duration, _______ it responds to changes in interest rates.
The more. Duration measures a bond's sensitivity to changes in interest rates.
5.
A bond lasts a certain length of time, after which it reaches its what?
Maturity. A bond's maturity is the date when it needs to be repaid.
