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Bonds 101: Bond Market Interest Rates

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1.
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.
2.
When bond prices fall, bond yields _______.
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Rise. When bond prices fall, bond yields rise.
3.
Changing interest rates affect bonds with different maturities to the same degree.
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False. Changing interest rates affect bonds with varying maturities differently.
4.
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.
5.
Duration is used to predict how much bond prices will change due to fluctuating interest rates.
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True. Duration takes into account the weighted average of a bond's coupon rates, its principal, and the time until the rates are paid.