1. Stock prices are more volatile than bond prices because: (more than one answer) Question 16 options: There is uncertainty about future cash inflows for stocks. There is no uncertainty about future cash inflows for bonds if held to maturity. There is no maturity for stocks. There are more stocks than bonds in the market. There are more bonds than stocks in the market. Bond issuers are more conservative than stock issuers. 2. True or False? Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then the interest rate you are earning from this bond is lower. 3. True or False? The current interest rate on a 10-year coupon bond (with face value = $1,000 and annual coupon rate = 3.25%) is 2.42%. This implies the buyer's return for holding the bond for 10 years will be 3.25%
1. Stock prices are more volatile than
Question 16 options:
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There is uncertainty about future |
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There is no uncertainty about future cash inflows for bonds if held to maturity. |
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There is no maturity for stocks. |
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There are more stocks than bonds in the market. |
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There are more bonds than stocks in the market. |
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Bond issuers are more conservative than stock issuers. |
2. True or False? Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then the interest rate you are earning from this bond is lower.
3. True or False? The current interest rate on a 10-year coupon bond (with face value = $1,000 and annual coupon rate = 3.25%) is 2.42%. This implies the buyer's return for holding the bond for 10 years will be 3.25%
Stocks are equity instruments which represent ownership in a company.
Bonds are debt instruments which carry an obligation to repay the principal amount along with periodic interest.
Stock prices are more volatile than bond prices because of the following reasons:
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