Bond Quiz

What is a bond?

• A bond is a type of insurance policy that protects against financial losses.

• A bond is a type of stock that represents ownership in a company.

• A bond is a fixed income instrument that represents a loan made by an investor to a borrower.

• A bond is a type of currency used in international trade.

What is a debt instrument?

• A debt instrument is a financial contract that represents a promise to repay a borrowed amount of money, along with interest, within a specified period of time.

• A debt instrument is a document that proves ownership of a property.

• A debt instrument is a tool used for measuring the weight of an object.

• A debt instrument is a type of musical instrument used in a band.

What are the key features of a bond?

• Interest rate, face value, duration, issuer, and yield.

• Interest rate, face value, duration, lender, and yield.

• Interest rate, face value, duration, borrower, and yield.

• Principal amount, coupon rate, maturity date, issuer, and credit rating.

What is the difference between a bond and a stock?

• A bond is backed by physical assets, while a stock is not backed by any assets.

• A bond is a debt instrument, while a stock represents ownership in a company.

• A bond is a short-term investment, while a stock is a long-term investment.

• A bond is a type of currency, while a stock is a type of investment.

What are the different types of bonds?

• treasury bonds, junk bonds, treasury bills, and convertible bonds

• credit default swaps, options, futures, and derivatives

• stocks, commodities, real estate, and mutual funds

• government bonds, corporate bonds, municipal bonds, and savings bonds

What is the role of credit ratings in bonds?

• Credit ratings provide an assessment of the creditworthiness of the issuer and help investors gauge the risk associated with the bond.

• Credit ratings are determined by the bondholders, not independent agencies.

• Credit ratings have no impact on the risk associated with the bond.

• Credit ratings only apply to stocks, not bonds.

What is the relationship between bond prices and interest rates?

• Bond prices and interest rates have a positive relationship.

• Bond prices and interest rates have an inverse relationship.

• Bond prices and interest rates are unrelated.

• Bond prices and interest rates have a direct relationship.

What is a coupon rate?

• The coupon rate is the price at which a bond or fixed-income security is sold.

• The coupon rate is the annual dividend paid on a stock.

• The coupon rate is the annual interest rate paid on a bond or fixed-income security.

• The coupon rate is the fee charged by a retailer for accepting a coupon.

What is a yield to maturity?

• Yield to maturity is the price at which a bond can be sold in the market.

• Yield to maturity is the total return anticipated on a bond if it is held until it matures.

• Yield to maturity is the annual income generated by a bond.

• Yield to maturity is the interest rate paid on a bond.

What are the risks associated with investing in bonds?

• Interest rate risk, credit risk, inflation risk, call risk, and liquidity risk.

• Liquidity risk, reinvestment risk, political risk

• Market risk, default risk, reinvestment risk

• Currency risk, political risk, market risk