Question 7: Which of the following statements is incorrect. (This question is worth 2 points.) a) The interest rate for Treasury Bonds does not reflect default risk. b) The interest rate for Treasury Bonds does not reflect credit risk. c) The interest rate for Foreign Bonds, either governments or corporate, reflect currency risk. d) The interest rate for Corporate Bonds reflects default risk. e) The interest rate for Corporate Bonds reflects credit risk. f) The interest rate for Treasury Bond reflects an inflation premium. g) The interest rate for Corporate Bonds reflects an inflation premium. h) The interest rate for Corporate Bonds reflects a liquidity premium. i) The interest rate for Corporate Bonds reflects a market risk premium. j) None of the above. k) Only b and e. Answer 7: Question 8: Which of the following statements is correct. (This question is worth 2 points.) a) In the secondary market, there is an inverse relationship between the bond value and market interest rate. b) In the secondary market, if the market interest rate increases, then the price of a bond tends to decrease. c) In the secondary market, if the market interest rate decreases, then the price of a bond tends to increase. d) Reinvestment risk is the risk that a holder will have if required to reinvest capital at a lower rate than the rate at which the long term debt was purchased. e) The real rate of return is equal to the risk free rate minus the inflation premium. f) If the risk free rate is 1.5% and the inflation premium is 1.0%, then the real rate of return is 0.5%. g) In the primary market, on top of the risk free rate, the following premiums are added to the interest rate of a corporate bond: default risk premium, liquidity premium, interest rate premium, reinvestment premium. h) Mathematically, the inverse relationship between bond value and market interest rate is the inverse relationship between the quotient and the denominator in the Universal Measure of Asset Value and Rate framework. i) All of the above. j) Only d, e, f, g, and h