17. Bonds sell at a premium when the market rate of interest is less than the bond's coupon rate.

True

False

18. The total risk of a portfolio increases as the number of assets decreases.

True

False

19. Which of the following statements is true?

A.

The longer the maturity of a security, the greater its interest rate risk.

B.

If investors believe inflation will be subsiding in the future, the prevailing yield will be upward sloping.

C.

The real rate of interest varies with the business cycle, with the lowest rates seen at the end of a period of business expansion and the highest at the bottom of a recession.

D.

The interest rate risk premium always adds a downward bias to the slope of the yield curve.

20. If the distribution of returns on an asset has a variance of zero, then covariance of returns between that asset and the returns on any other asset must be greater than zero.

True

False