# [Solved] Which of the Following Are Generally TRUE of Bonds

## Which of the following are generally TRUE of bonds?

A)A bond's return equals the yield to maturity when the time to maturity is the same as the holding period.

B)A rise in interest rates is associated with a fall in bond prices,resulting in capital gains on bonds whose terms to maturity are longer than the holding periods.

C)The longer a bond's maturity,the smaller is the size of the price change associated with an interest rate change.

D)Prices and returns for short-term bonds are more volatile than those for longer-term bonds.

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- Q68: Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year,what is the yearly return on the bond you are holding? A)5 percent B)10 percent C)15 percent D)20 percent
- Q69: I purchase a 10 percent coupon bond. Based on my purchase price,I calculate a yield to maturity of 8 percent. If I hold this bond to maturity,then my return on this asset is A)10 percent. B)8 percent. C)12 percent. D)there is not enough information to determine the return.
- Q70: If the interest rates on all bonds rise from 5 to 6 percent over the course of the year,which bond would you prefer to have been holding? A)a bond with one year to maturity B)a bond with five years to maturity C)a bond with ten years to maturity D)a bond with twenty years to maturity
- Q71: An equal decrease in all bond interest rates A)increases the price of a five-year bond more than the price of a ten-year bond. B)increases the price of a ten-year bond more than the price of a five-year bond. C)decreases the price of a five-year bond more than the price of a ten-year bond. D)decreases the price of a ten-year bond more than the price of a five-year bond.
- Q72: An equal increase in all bond interest rates A)increases the return to all bond maturities by an equal amount. B)decreases the return to all bond maturities by an equal amount. C)has no effect on the returns to bonds. D)decreases long-term bond returns more than short-term bond returns.
- Q74: Which of the following are generally TRUE of all bonds? A)The longer a bond's maturity,the greater is the rate of return that occurs as a result of the increase in the interest rate. B)Even though a bond has a substantial initial interest rate,its return can turn out to be negative if interest rates rise. C)Prices and returns for short-term bonds are more volatile than those for longer term bonds. D)A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period.
- Q75: The riskiness of an asset's returns due to changes in interest rates is A)exchange-rate risk. B)price risk. C)asset risk. D)interest-rate risk.
- Q76: Interest-rate risk is the riskiness of an asset's returns due to A)interest-rate changes. B)changes in the coupon rate. C)default of the borrower. D)changes in the asset's maturity.
- Q77: Prices and returns for ________ bonds are more volatile than those for ________ bonds,everything else held constant. A)long-term;long-term B)long-term;short-term C)short-term;long-term D)short-term;short-term
- Q78: There is ________ for any bond whose time to maturity matches the holding period. A)no interest-rate risk B)a large interest-rate risk C)rate-of-return risk D)yield-to-maturity risk

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