1 Which of the following bond ratings would be associated wi

1. Which of the following bond ratings would be associated with the lowest interest rate? b. BBE C. A 2. The relationship between maturity and interest rates (yields) is the a. coupon rate b. Fisher Effect c. default risk d. yield curve 3. I f inflation is expected to increase over the next few years what has happened to the yield (market interest rate) on corporate bonds? a. yields are lower b. yields are higher c. there is no change 4. The interest rate paid by a corporation on its bonds is the a. indenture b. call provision c. mortgage d. coupon 5. A secured bond is a a. preferred stock b. indenture c. mortgage d. debenture

Solution

1

AAA rating carries lowest interest rate

2

Yield curve reflects relation between maturity and interest rate yield

3

Increase in inflation increases market interst rate. Thus, yields are higher.

4

Interest paid is called coupon

5

Mortgage is secured.

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