4th Quiz - Inversiones

What is a high-yield bond?

• A bond issued by the government with low credit risk.

• A bond issued by a company with low credit risk.

• A bond issued by the government with high credit risk.

• A bond issued by a company with high credit risk.

What is credit risk in corporate bonds?

• The risk that the bond's interest will not be paid on time.

• The risk that the bond's principal will not be paid on time.

• The risk that the issuing company may experience financial difficulties and fail to meet its financial obligations, including the payment of the bond's principal and interest.

• The risk that an unexpected event may negatively impact the market price of the bond.

What is liquidity risk in corporate bonds?

• The risk that the issuing company may not be able to pay the bond's interest.

• The risk that the issuing company may not be able to pay the bond's principal.

• The risk that there may not be enough buyers or sellers in the market to buy or sell the bonds.

• The risk that an unexpected event may negatively impact the financial solvency of the issuing company.

What is a zero-coupon bond?

• A special type of coupon with a very high interest rate.

• A special type of coupon with no interest rate, issued at a discount and payable at the bond's maturity.

• A special type of coupon with a very low interest rate.

• A special type of coupon with a variable rate based on market performance.

What is the three-step process to calculate the price of a bond?

• Obtain the cash flows, obtain the discount rates, and obtain the bond price.

• Obtain the cash flows, obtain the interest rates, and obtain the bond price.

• Obtain the cash flows, obtain the discount rates, and obtain the internal rate of return.

• Obtain the cash flows, obtain the interest rates, and obtain the internal rate of return.

What is modified duration?

• A measure of credit risk associated with a bond.

• A measure of market risk associated with a bond.

• A measure of the expected percentage change in interest rates for a given percentage change in the bond's price.

• A measure of the expected percentage change in the bond's price for a given percentage change in interest rates.

What factors explain the total variations in yield curves?

• The political and economic factors of the country.

• The different maturities and interest rates.

• The different types of available investments.

• Not specified in the text.

What shape would the yield curve have if market participants were indifferent to maturities?

• It would be flat.

• It would be upward sloping.

• It would be downward sloping.

• Not specified in the text.

What factors can guide market participants' preferences regarding the maturities of the yield curve?

• The inflation rate and the exchange rate.

• Their expectations, the nature of their liabilities or assets, and the level of risk premiums they require to compensate for their risk aversion.

• The political and economic factors of the country and the stock market situation.

• Not specified in the text.

What are the three categories of classical economic theories of the term structure of interest rates?

• Pure expectations theory, pure market theory, and pure risk theory.

• Pure market theory, pure risk theory, and pure liquidity preference theory.

• Pure expectations theory, pure risk premium theory, and pure liquidity preference theory.

• Categories are not specified in the text.