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4 Written questions

3 Multiple choice questions

  1. the risk that income from a bond portfolio will vary because cash flows must be reinvested at current market rates
  2. a bond that sells below its par value. this occurs whenever the going rate of interest rises above the coupon rate
  3. a long-term debt instrument (loan)

3 True/False questions

  1. interest (current) yieldthe interest payment divided by the market price of the bond


  2. capital gains yieldthe percentage change in the market price of a bond over some period of time


  3. call pricethe price a firm has to pay to recall a bond; generally equal to the principal amount plus some interest


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