Bond Investment Quiz

What is the primary risk associated with investing in fixed income securities?

• Inflation Risk

• Interest rate risk

• Default risk

• Liquidity risk

Which of the following measures the sensitivity of a bond's price to changes in interest rates?

• Convexity

• Duration

• Yield curve

• Coupon rate

Which type of bond has a coupon rate that adjusts periodically based on a reference interest rate?

• Fixed-rate bonds

• Floating-rate bonds

• Zero-coupon bonds

• Callable bonds

Which of the following terms refers to the bond's ability to be repurchased by the issuer before maturity?

• Call option

• Convertible feature

• Put option

• Amortization

A bond is selling at a discount when:

• Its coupon rate is higher than the market interest rate

• Its market rate is lower than par value

• it is trading below its yield to maturity.

• Its duration is less than its maturity

What does a yield curve typically show?

• The relationship between bond prices and time to maturity

• The relationship between interest rates and time to maturity

• The relationship credit ratings and bond yields

• The relationship between duration and convexity

The credit spread of a corporate bond refer to

• The difference between the bond's yield and the yield on a government bond

• The risk of default on the bond

• The bond's price relative to par value

• The amount by which the bond's duration exceeds its maturity

Which of the following is most likely to increase when bond prices fall due to rising interest rates?

• Yield to maturity

• Coupon payments

• Credit rating

• Convexity

Which of the following is not a component of bond yield?

• Credit risk premium

• Liquidity premium

• Dividend yield

• Inflation risk premium

A bond has a yield to maturity of 5% and a coupon rate of 6%. The bond is trading at:

• Par

• A premium

• A discount

• Below its duration