1. Which of the following types of bonds have the most default risk?

a. Corporate C-rated bonds b. Treasury bonds c. Municipal bonds d. Kenosha City bond e. Corporate A-rated bond

2. Which of the following events would make it more likely that an investor would put (give back) his/her puttable bonds?

a. Market interest rates decline sharply. b. The company's bonds are downgraded. c. Inflation decreases significantly. d. The company's financial situation improved significantly. e. Market interest rate is like the past.

3. Which of the following statements is CORRECT?

a. If rates fall after its issue, a zero-coupon bond could trade at a price above its maturity (or par) value.

b. If rates fall rapidly, a zero-coupon bond's expected appreciation could become negative.

c. If a firm moves from a position of strength toward financial distress, its bonds' yield to maturity would probably decline.

d. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.

e. If a bond is selling at a premium, this implies that its yield to maturity exceeds its coupon rate.

4. Which is the best measure of risk for a single asset held in isolation?

a. Standard deviation b. Correlation coefficient. c. Beta d. Variance. e. All looks wrong