1) 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.
2) 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.
3) 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.