PFM 106-FINAL QUIZ REVIEW

The present value of a bond's face value decreases as the time to maturity increases, assuming a positive discount rate.

• TRUE

• FALSE

A foreign currency put option allows the holder to buy the currency at a later date.

• TRUE

• FALSE

The Options Clearing Corporation (OCC) acts as the guarantor for options traded on the Chicago Board Options Exchange (CBOE).

• TRUE

• FALSE

In a forward contract, the long position profits if the future spot price is lower than the forward price

• TRUE

• FALSE

Forward contracts are considered to have low credit risk because they are guaranteed by a central institution

• TRUE

• FALSE

While the coupon payments of a typical non-amortizing bond are fixed, their present value to an investor is constant over the bond's life, assuming a constant discount rate.

• TRUE

• FALSE

The spot rate for a specific maturity can be directly observed from the quoted yield of a coupon-paying bond with the same maturity.

• TRUE

• FALSE

Sovereign bonds, due to their backing by national governments, inherently carry no risk of default.

• TRUE

• FALSE

Bond ratings are static and once assigned to a bond issue, they remain unchanged throughout the bond's life.

• TRUE

• FALSE

A bond selling at a premium implies that its coupon rate is lower than its current yield.

• TRUE

• FALSE