Question 1

A bonds coupon rate reflects which of the following risks?

Group of answer choices

Default risk

Interest rate risk

Inflation risk

Liquidity risk

All of these

Question 2

Suppose that the Federal Reserve increases the federal fund rate in anticipation of an increase in inflation. How does this affect outstanding bonds?

Group of answer choices

Prices of outstanding bonds increase

Prices of outstanding bonds decrease

Par values of outstanding bonds increase

Par values of outstanding bonds decrease

None of these

Question 3

Which of the following statements is true about U.S. Government debt?

Group of answer choices

The U.S. Governments debt-to-GDP is currently at its highest point since World War II

Investors view U.S. Treasury bonds as a riskless asset, because it is impossible for the U.S. Government to default on its debts

The U.S. Government has never experienced a credit rating downgrade by any of the three major credit rating agencies

The U.S. Government never ran a budget deficit prior to the World War II

None of these

Question 4

Which of the following bond market actors are required by to act in the best interest of the bond investor?

Group of answer choices

The underwriter

The bond counsel

The financial advisor

The bond issuer

None of these

Question 5

Which of the following statements is true?

Group of answer choices

Credit ratings summarize a bond issuers risk of bankruptcy

Credit rating agencies earn revenue by selling credit ratings to investors

All bond issuers are required by law to receive a credit rating

Bonds sold by AAA-rated issuers are viewed as perfectly riskless assets

None of these