QUESTION 55

1. Which of the following is/are correct regarding the reasons an investor might consider investing in corporate bonds? (1) They have lower default risk than Treasuries. (2) They generally pay higher interest than Treasuries. (3) They generally offer some inflation protection via the semi-annual payment of coupons. (4) They offer higher security of principal than equities. (5) Convertible bonds may participate if the companys shares rise in value.

   		a. 1, 2 and 3.
   		b. 2, 3 and 4.
   		c. 2 and 4.
   		d. 2, 4 and 5.

QUESTION 56

1. Which of the following would likely cause a bond to have a lower market value? (1) The issuers credit rating changed from A to AA. (2) The issuers credit rating changed from AA to A. (3) The YTM of comparable securities rose. (4) The YTM of comparable securities declined. (5) The bond included a call feature.

   		a. 1, 3 and 4.
   		b. 2 and 4.
   		c. 2, 3 and 5.
   		d. 2, 4 and 5.