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Bonds 101: Bond Market Interest Rates

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1.
When interest rates fall, bond investors can potentially make a profit by _______.
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Selling bonds. If their bonds pay a higher interest rate than newly issued bonds would, the investors could find their bonds in great demand and thus sell them for a profit.
2.
Stock and bond values sometimes change in opposite directions.
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True. This can be the result of trends in the financial health of companies.
3.
The longer a bond's maturity, the larger its discount when interest rates rise.
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True. The longer a bond's maturity, the larger its discount when interest rates rise.
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.
When an investor has to sell his or her bond at a discount, it usually means _______.
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Interest rates have risen. The investor must do this to attract buyers, who can get higher rates elsewhere.