FIN 375 EXAM WITH 100% CORRECT
ANSWERS
Which of the following is more likely to adversely affect long-term bond prices? -
Answer- A forecast of higher inflation over the next ten years
Expected lower rates of inflation in the future will lead to an upward sloping yield curve.
- Answer- False
The call price of a bond is usually below the bond's par value. - Answer- False
Treasury and corporate security yields are often combined on the same yield curve. -
Answer- False
The less marketable a security, the higher its yield. - Answer- True
The major reason that municipal bonds have lower yields than corporate bonds is that,
as a class, municipal debt has less marketability than corporate debt. - Answer- False
Investment-grade bonds are more likely to default than speculative-grade bonds. -
Answer- False
Historically, high default premiums have been associated with - Answer- Economic
recessions
The relationship between maturity and yield to maturity is called the
________________. - Answer- Term structure
The yield differentials between an AAA-rated corporate bond and an otherwise similar
BBB-rated corporate bond may be explained by - Answer- Default risk
Which of the following is not considered when assigning a bond rating? - Answer- The
rating on the prior issue of securities sold
Which of the following statements about bonds is NOT true? - Answer- Bonds selling at
premium are especially high quality.
Which of the following statements is true? - Answer- Default risk premiums vary
inversely with economic activity.
ANSWERS
Which of the following is more likely to adversely affect long-term bond prices? -
Answer- A forecast of higher inflation over the next ten years
Expected lower rates of inflation in the future will lead to an upward sloping yield curve.
- Answer- False
The call price of a bond is usually below the bond's par value. - Answer- False
Treasury and corporate security yields are often combined on the same yield curve. -
Answer- False
The less marketable a security, the higher its yield. - Answer- True
The major reason that municipal bonds have lower yields than corporate bonds is that,
as a class, municipal debt has less marketability than corporate debt. - Answer- False
Investment-grade bonds are more likely to default than speculative-grade bonds. -
Answer- False
Historically, high default premiums have been associated with - Answer- Economic
recessions
The relationship between maturity and yield to maturity is called the
________________. - Answer- Term structure
The yield differentials between an AAA-rated corporate bond and an otherwise similar
BBB-rated corporate bond may be explained by - Answer- Default risk
Which of the following is not considered when assigning a bond rating? - Answer- The
rating on the prior issue of securities sold
Which of the following statements about bonds is NOT true? - Answer- Bonds selling at
premium are especially high quality.
Which of the following statements is true? - Answer- Default risk premiums vary
inversely with economic activity.
