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4 Written Questions

3 Multiple Choice Questions

  1. the risk of changes in bond prices to which investors are exposed due to challenging interest rates
  2. the risk that income from a bond portfolio will vary because cash flows must be reinvested at current market rates
  3. a bond that sells below its par value. this occurs whenever the going rate of interest rises above the coupon rate

3 True/False Questions

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

          

  2. capital gains yieldthe price a firm has to pay to recall a bond; generally equal to the principal amount plus some interest

          

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

          

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