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4 Written questions

3 Multiple choice questions

  1. the percentage change in the market price of a bond over some period of time
  2. a long-term debt instrument (loan)
  3. the price a firm has to pay to recall a bond; generally equal to the principal amount plus some interest

3 True/False questions

  1. interest rate price riskthe risk that income from a bond portfolio will vary because cash flows must be reinvested at current market rates


  2. yield to call (YTC)the average rate of return earned on a bond if it is held until the first call date


  3. premium bonda bond that sells below its par value. this occurs whenever the going rate of interest rises above the coupon rate


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