Cash flows must be reinvested at current market rates

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Reference no: EM131863710

1. The risk that income from a bond portfolio will vary because cash flows must be reinvested at current market rates is called:

a. ?market yield risk.

b. ?interest rate reinvestment risk.

c. ?interest rate price risk.

d. ?yield to maturity risk.

e. ?capital gain yield risk.

2. Which of the following indicates that the cost of money will increase?

a. Increase in money supply in the market

b. Increase in inflation of an economy

c. Decrease in federal deficit of a country

d. Increase in liquidity of an asset

e. Decrease in tax rates for corporates

3. If the U.S. runs a large foreign trade deficit, then the:?

a. ?tax revenue will decrease.

b. ?sales of Treasury securities will decrease.

c. ?money supply will increase.

d. ?interest rates will increase.

e. ?government subsidies will increase.

4. For installment loans, the maturity date is:

a. ?the date on which the market interest rate rises above the coupon rate.

b. ?the date on which the coupon rate rises above the market interest rate.

c. ?the date on which the last coupon interest payment is made to the bondholders.

d. ?the date on which the first installment payment is due.

e. ?the date on which the last installment payment is due.

Reference no: EM131863710

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