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1. Bond prices respond to changes in the market rate (YTM) by moving in the opposite direction as the change. True False 2. Bond ratings are not the primary measure of default risk. True False 3. Which of the following statements is most correct? a. The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates, other things held constant. b. You hold two bonds. One is a 10-year, zero coupon, bond and the other is a 10 -year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience the smaller percentage decline. c. You hold two bonds, a 10 -year, zero coupon, issue and a 10 -year bond that pays a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from its current level, the zero coupon bond will experience the larger percentage decline. 4. A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is most correct? a. The bond's coupon rate exceeds its current yield. b. The bond's current yield exceeds its yield to maturity. c. If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850. d. The bond's current yield is equal to its coupon rate. e. The bond's yield to maturity is greater than its coupon rate