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Which of the following statements is true regarding investments in bonds?

a.

Treasury bonds should return more than corporate bonds of the same maturity

b.

longer maturities should return more than shorter maturities, in general

c.

shorter maturities should return more than longer maturities, in general

d.

lower-rated issues should return less than higher rated issues at maturity

Which of the following is NOT true regarding bond maturities?

a.

Short maturities serve to protect the investor when rates are rising.

b.

Long term interest rates are more volatile than short term interest rates

c.

Longer maturities have greater price fluctuations.

d.

Short maturities sacrifice price appreciation opportunities.

Which of the following is NOT a true statement?

a.

Duration is the weighted average of the timing of the bonds payments.

b.

The weights in the calculation of duration are the present value of each payment, divided by the value of the bond.

c.

Modified duration measures the sensitivity of the bonds price to interest rate changes.

d.

Duration measures the time until the principal is repaid.

For most long term bonds, when coupons are reinvested, what is the most important component of the bond total return?

a.

Coupon rate.

b.

Yield to Maturity

c.

Interest on principal.

d.

Interest on interest.

Which of the following statements concerning yield spreads is not true?

a.

Yield spreads may be positive or negative.

b.

Yield spreads are often calculated by changing the maturity of the different bonds.

c.

Yield spreads are influenced by the level of interest rates in the market.