26-89 Why do garbage class bonds often have a negative duration?
A)The value of the returns in this bond class increases when interest rates increase.
B)It gives the rights to collateralization.
C)Bond values fall with interest rate increases.
D)It gives rights to reinvestment income on the cash flows in the CMO trust.
E)Siignificant risk premium required by the uninsured depositors.

Question

Quizplus · Accepted Answer

Garbage class bonds, often high-yield or junk bonds, can have negative duration because their value may increase when interest rates rise, as they are more sensitive to credit risk than interest rate risk.

26-89 Why Do Garbage Class Bonds Often Have a Negative