The yield on regular non-callable fixed coupon bond

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Reference no: EM131999367

1. Principal components analysis shows that the second most common yield curve shift is best represented as a:

a An equal shift of all points

b A shift of all points in the same direction

c A tilting of the yield curve

d A bowing of the yield curve

2. The 3M spot rate is 6% and the 6M spot rate is 5%. As a firm believer in pure expectation yield curve theory, which statement best reflects your beliefs about the 3M rate that will apply in 3 months time?

a The rate will be less than 5%

b The rate will be between 5% and 6%

c The rate will be greater than 6%

d It depends on my own expectation

3. What impact would you expect for a rise in the yield on a regular non-callable fixed coupon bond?

a The price falls, the duration falls, and convexity falls

b The price falls, the duration falls, and convexity rises

c The price falls, the duration rises and convexity rises

d Can't be certain

4. The price of a corporate bond has been observed to fall over the past 3 years. Which is NOT a plausible explanation?

a Approaching maturity

b Rising inflation

c Rising credit rating

d Rising yields

5. Which term best describes the legal contract defining a bond.

a Covenant

b Seniority

c Indenture

d Collateral

Reference no: EM131999367

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