The interest rate of the bond have an inverse relationship

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Reference no: EM131622066

1. "The price of the bond and the interest rate of the bond have an inverse relationship." True or false?

2. "The default risk premium in an interest rate is the compensation demanded by the buyer of the debt security for the possibility that the seller may default on the payments. Investors charge a higher default risk premium to securities that are more likely to default." True or false?

3. "For two bonds identical in every respect except the time to maturity, the price of the longer-term bond is more sensitive to the changes in interest rates than that of the shorter-term bond; that is, the longer-term bond has a higher interest rate risk." True or false?

4. "For the indexing bond portfolio managing strategy, the tracking error is measure by the standard deviation of the difference between the realized return of the portfolio and the realized return of the index." True or false?

5. If a bond does not pay coupon payment; that is, the coupon rate is zero, its duration is equal to its time to maturity." True of false?

6. "Most coupon bonds are issued at par, which implies that the coupon rate is normally set equal to the required rate of return (that is, the interest rate) of the bond." True or false?

Reference no: EM131622066

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