Question
Match the following terms to the definition. Interest Rate Risk Reinvestment Rate Risk Default Risk Floating rate bond Zero Coupon Bond Consol Bond A. Risk
Match the following terms to the definition.
Interest Rate Risk
Reinvestment Rate Risk
Default Risk
Floating rate bond
Zero Coupon Bond
Consol Bond
A. | Risk associated with price fluctuations caused by interest rate changes |
B. | This is the risk that a firm's cost of debt will fall and as a result reinvested coupon payments will earn less yield moving forward. |
C. | Risk that the Borrower will not make payments on time or in full |
D. | Coupon Payments typically follow a benchmark market rate |
E. | All of the yield is determined by the difference in the price of the bond and the par value |
F. | Can be assessed using the perpetuity formula |
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