Upward pressure on required rate of return on bonds

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1. True or false: If bond portfolio managers expect interest rates to increase in the future, they would likely to decrease their holdings of bonds now, which could cause the prices of bonds to increase as a result of their actions. Please explain.

2. True or false: If interest rates suddenly decline, those existing bonds that have a call feature are more likely to be called the issuer will pay the difference between the market value of bond and par value which is called the call premium. Please explain.

3. True or False: If the level of inflation is expected to increase, there will be an upward pressure on interest rates and upward pressure on the required rate of return on bonds. Therefore, portfolio managers will decrease the holding of bonds portfolio. Explain why.

Reference no: EM131943798

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