True/False

1. If you think interest rates are going to decrease in the future, you would prefer a long term bond vs. a short term bond.

2. Correct/Incorrect. If a bonds coupon rate is less than the bonds yield to maturity, then the bond must be a premium bond.

3. If a bond is upgraded from A to AA, then investors will demand a higher return on that bond.

4. There is a positive relationship between bond prices and yields.

5. Long term bonds have more reinvestment risk and more price risk than short term bonds.

6. If you have a coupon bond and a zero coupon bond, same face value, the zero coupon bond will have less reinvestment rate risk than the coupon bond.

7. Rank the following bonds from highest to lowest price risk, with the highest risk bond "1" and the lowest risk bond "4"

2 year zero coupon bond

2 year 5% coupon bond

30 year 5% coupon bond

30 year zero coupon bond