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4 Written questions

3 Multiple choice questions

  1. the price a firm has to pay to recall a bond; generally equal to the principal amount plus some interest
  2. the average rate of return earned on a bond if it is held until the first call date
  3. the average rate of return earned on bond of it held to maturity

3 True/False questions

  1. interest rate price riskthe risk of changes in bond prices to which investors are exposed due to challenging interest rates


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


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


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