Why would a bond trade at a discount to par? 1. The term structure of interest rates is higher than when the bond wa issued II. The credit quality has deteriorated III. The Fed cut rates and US Treasury yields fell IV. The bonds are being called I only 1 & ll only Ill only O 1, II, & IV Question 24 (5 points) 41 Listen The economy is expanding too strongly and inflation is rising, so the Fed wants to increase the cost of capital by raising interest rates. As a bond portfolio manager, you would want to Buy zero coupon bonds Sell TIPS sell 2's, buy 10's shorten duration