16. Which bond would have the lowest interest rate risk?

a) 10 year, 3% coupon bond

b) 30 year, 5% coupon bond

c)10 year, 5% coupon bond

d)30-year, 3% coupon bond

HINT: NOT A

18.

Which of the following statements about credit ratings is least correct?

a) Credit ratings are a pay to play scheme

b) Credit ratings do aa reasonable job of predicting default on corporate debt

c) Credit Ratings are adjust quickly to new information

d) Credit ratings to measure the securites default risk

HINT: NOT D

19. Which of the following embedded options is most likely to have a collar?

a) convertible to stock

b) put option

c) floating rate

d) call option

HINT: NOT B

20.

Which cash flows are bond investors concerned about receiving in the future?

I. Par Value

II. Coupon payments

III. Capital Gain

IV. Reinvested interest income

a) I & IV only

B )I & II only

C)II & III only

D) I, II, III and IV

HINT : NOT C