Which is the result of market imperfections

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Reference no: EM131622061

1. "For a bond, the price decline due to an increase in the interest rate is larger than the price gain due to a decrease in the interest rate of equal magnitude. This is known as the convexity property." True or false?

2."If the interest rate of a bond is higher than the coupon rate of the bond, the bond is a premium bond; that is, the market price of the bond is higher than the par value." True or false?

3. "If the yield spread between the AAA corporate bonds and the government bonds with similar features (coupon, maturity, and so on) is deemed too large, compared to the historical average spread under similar economic condition, investors may sell their corporate bonds and replace them with the Treasury bonds." True or false?

4. If the yield curve is upward-sloping, investors may buy the lower-yield, shorter-maturity Treasury securities and sell the higher-yield, longer-maturity ones. This is known as the pure yield pick up swap." True or false?

5. "When the yield of a bond increases, the duration-based percentage change in price is higher than the percentage change based on true price." True or false?

6."A non-zero credit spread differential indicates that two markets assess the credit risks of two firms differently, which is the result of market imperfections." True or false?

Reference no: EM131622061

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