1

Which of the following statements is CORRECT?

a. Reinvestment rate risk affects debt securities with short maturities.

b. Interest rate risk affects debt securities with long maturities.

c. The time to maturity has no impact on reinvestment nor interest rate risk.

d. Both a and b are correct statements.

2.

Which of the following best describes the relationship between bond prices and interest rates?

a. Bond prices and interest rates have an inverse relationship.

b. Bond prices and interest rates move in the same direction.

c. The answer depends on the coupon rate.

d. If the coefficient of variation is less than 0, then bond prices and interest rates have an inverse relationship.

e. If the coefficient of variation is greater than 0, then bond prices and interest rates move in the same direction.

3.

Returns from owning stock is(are) composed of:

a. Price appreciation and coupon payments.

b. Price appreciation and dividends.

c. Debentures and subordinated coupons.

d. Par value and accrued depreciation