Consider the following statements: Question 1 Not yet answered Not graded Statement A: New information about an entity's default probability is incorporated into its bond prices rapidly. Statement B: Par values of defaultable bonds are discounted more than par values of non-defaultable bonds. P Flag question Which of the statements given above is correct? Select one: Neither statement A nor B Only statement A Only statement B Both statement A and B Consider the following statements: Question 2 Not yet answered Not graded Statement A: If the default risk of an entity is perceived to change, all defaultable bond prices in the market will change. Statement B: The difference between a government bond price and a corporate bond price is likely due to default risk. P Flag question Which of the statements given above is correct? Select one: Only statement A Both statement A and B Neither statement A nor B Only statement B Question 3 Not yet answered Not graded How will one-year zero-coupon bond prices change if both the one-year and four- year interest rates increase by 1%? P Flag question Select one: One-year zero-coupon bond prices will decrease by the same amount as four- year zero-coupon bond prices. One-year zero-coupon bond prices will decrease by less than four-year zero- coupon bond prices. It depends on whether there are other changes to the yield curve. One-year zero-coupon bond prices will decrease by more than four-year zero- coupon bond prices. Question 4 Consider the following statements: Not yet answered Not graded Statement A: Because future payments are fixed, investing in the fixed- income markets involves very little risk. Statement B: Borrowers in bond markets are only involved in primary bond trades. Flag question Which of the statements given above is correct? Select one: O Both statement A and B Only statement A Only statement B Neither statement A nor B Question 5 What is the recovery of a bond? Not yet answered Not graded P Flag question Select one: A new issuance of a bond after it has been traded on the secondary market The fee an investor must pay to purchase a bond after primary trades are exhausted The fraction of par value that the bond holder gets in the event of default The discount an investor gets to compensate them for facing credit risk Consider the following statements: Question 1 Not yet answered Not graded Statement A: New information about an entity's default probability is incorporated into its bond prices rapidly. Statement B: Par values of defaultable bonds are discounted more than par values of non-defaultable bonds. P Flag question Which of the statements given above is correct? Select one: Neither statement A nor B Only statement A Only statement B Both statement A and B Consider the following statements: Question 2 Not yet answered Not graded Statement A: If the default risk of an entity is perceived to change, all defaultable bond prices in the market will change. Statement B: The difference between a government bond price and a corporate bond price is likely due to default risk. P Flag question Which of the statements given above is correct? Select one: Only statement A Both statement A and B Neither statement A nor B Only statement B Question 3 Not yet answered Not graded How will one-year zero-coupon bond prices change if both the one-year and four- year interest rates increase by 1%? P Flag question Select one: One-year zero-coupon bond prices will decrease by the same amount as four- year zero-coupon bond prices. One-year zero-coupon bond prices will decrease by less than four-year zero- coupon bond prices. It depends on whether there are other changes to the yield curve. One-year zero-coupon bond prices will decrease by more than four-year zero- coupon bond prices. Question 4 Consider the following statements: Not yet answered Not graded Statement A: Because future payments are fixed, investing in the fixed- income markets involves very little risk. Statement B: Borrowers in bond markets are only involved in primary bond trades. Flag question Which of the statements given above is correct? Select one: O Both statement A and B Only statement A Only statement B Neither statement A nor B Question 5 What is the recovery of a bond? Not yet answered Not graded P Flag question Select one: A new issuance of a bond after it has been traded on the secondary market The fee an investor must pay to purchase a bond after primary trades are exhausted The fraction of par value that the bond holder gets in the event of default The discount an investor gets to compensate them for facing credit risk
