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Bonds 101: Bond Market Interest Rates

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1.
A continuous rise in bond prices indicates a bullish market.
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True. It is accompanied by falling interest rates.
2.
When interest rates fall, assuming an equal amount for all bond maturities, bonds with short maturities will have _______.
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Smaller premiums than bonds with longer maturities. Short maturities mean small discounts.
3.
The lower a bond's credit risk, the higher its yield.
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False. The lower a bond's credit risk, the lower its yield. Low-risk bonds generally pay less interest than those that carry higher risk.
4.
If interest rates rise 2 percent and a bond's duration is 10 years, you can expect _______.
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The bond's price to fall 20 percent. If interest rates rise 2 percent and a bond's duration is 10 years, you can expect the bond's price to fall 20 percent.
5.
The amount of fixed interest a bond pays each year until it matures is called its _______.
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Coupon rate. Premiums and discounts are not interest rates.