16) An investor is likely to exercise his/her rights on a puttable bond if:

A. the YTM on the bond increases

B. the stock price of the bond issuer decreases significantly

C. there is default on the bond.

D. all of the above

17) An investor is likely to see the issuer of the bond exercise its rights on a callable bond if:

A. the YTM on the bond decreases

B. inflation increases in the economy

C. there is default on the bond.

D. all of the above

18) Bond A has a lower YTM than bond B. This could be because:

A. Bond A has a greater probability of default.

B. Bond A is more liquid than bond B.

C. Bond A has more time to maturity than B.

D. Inflation in the economy is relatively high.

19) Consider a 7-year bond with a 9% coupon and a current yield to maturity of 12%. If an investor buys this bond and holds it all the way to maturity:

A. the price of the bond will generally decline over time until it reaches the face value at maturity. B. the price of the bond will generally decrease over the first six years, but then increase in the final year to maturity. C. the price of the bond will generally increase over time until it reaches the face value at maturity. D. the price of the bond will generally increase over the first six years, but then decrease in the final year to maturity.

20) The main reason why an investors return on a bond typically does not match YTM exactly is:

A. bonds commonly end up in default

B. bond prices change over time as they get closer to maturity

C. YTM itself is typically not constant over time.

D. bond prices are especially volatile, much more so than stocks.