1. Which of the following statement is incorrect?

a. Long-term bonds carry substantially more interest rate risk than short-term bonds.

b. Whenever a bond's coupon rate is greater than the market rate of interest on similar bonds (the bond's yield), the bond will sell at par value, and we call such bonds par-value bonds.

c. The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments equal to the price of the bond.

d. A call provision gives the firm issuing the bonds the option to purchase the bond from an investor at a predetermined price called as the call price.

e. Most of the answers are correct except one.

2. Which of the following statement is correct?

a. The most important investors in corporate bonds are individual investors.

b. All the answers are correct.

c. Bonds that sell at prices above par are called premium bonds.

d. Whenever a bond's coupon rate is greater than the market rate of interest on similar bonds (the bond's yield), the bond will sell at par value, and we call such bonds par-value bonds.

e. As interest rates fall, the prices of bonds decline.