Fill in the blank:

An increase in the rate of inflation the purchasing power of a bond's interest payments.

Group of answer choices

increases

has no affect on

decreases

The prices of fixed rate debt instruments are sensitive to changes in interest rates. When interest rates rise, even the market prices of both federal government and state and local government bonds fall. The possibility of rising interest rates is a major source of risk to investors in all fixed income assets.

Group of answer choices

True

False

As long as a bond has a positive coupon rate, its yield to maturity cannot be negative.

Group of answer choices

True

False