a rise in risk premium will cause bond market prices to rise? true or false?

Q: Is it true or false? The inflation risk premium theory implies that, in normal circumstances, we can…

A: The objective of the question is to understand whether the inflation risk premium theory implies an…

Q: Why should we care what the Term Structure of Interest Rates looks like?  The Expectations Theory of…

A: The question is to explain the concept of term structure of interest rate, which varies with change…

Q: What is a maturity risk premium?   Group of answer choices -A premium that reflects interest rate…

A: Maturity risk premium: It is the additional return on investment when buying any bond with longer…

Q: Explain why the dirty price of a bond might fall sharply before the next coupon is paid?

A: Dirty price of bond include clean price plus accrued interest.

Q: Is a greater yield to maturity or a lower yield to maturity better to bondholders? Why?

A: When the yield to maturity rises, the bond's price decreases. If the bondholder sold it at that…

Q: Is it better for bondholders to have a higher or lower return? Why?

A: The question is related to the Bonds that generates high return and low return. Lower return bonds…

Q: Is default risk premium likely to be pro-cyclical (i.e., increasing during economic expansion) or…

A: The difference between the company's actual interest rate and risk free rate within the industry is…

Q: The risk that a bond cannot be sold since the issuer is not well known is called: a.default risk…

A: The risk of holding fixed income securities like bonds comprise of default risk, interest rate risk…

Q: b. Assume that you maintain bonds and money market securities in your portfolio and you suddenly…

A: The higher worth of bonds suggests that lower interest rates; lower interest rates restore…

Q: Would there be positive interest rates on bonds in a world with absolutely no risk

A: The fixed income securities which are issued by a firm is known as bond. The fixed income is known…

Q: Why is it an interest rate risk when investing in long-term bonds?

A: Long-term bonds are those bonds that have the longest maturity offering from U.S. Treasury.…

Q: For the holder of a fixed-rate coupon bond, reinvestment risk is a bigger problem during a period of…

A: Fixed rate bonds are a type of bond which pays a fixed periodic coupon calculated on the face value…

Q: Which of the following would cause lower bond yields? greater maturity risk or more liquidity?

A: Maturity risk premium: It is the measure of additional return that is expected in an investment by…

Q: Please explain why this statement is (False).  Ignoring default risk, if a bond's expected return…

A: The expected return is the return from an investment that the market expects based on the bond's…

Q: How does risk affect interest rates?

A: The risk and the interest rates are in a direct relationship that is, the greater the risk the…

Q: Default risk refers to the value a bond investor will lose if the issuer defaults. It as a…

A: Risk is defined in monetary terms as the possibility that the actual return from a result or…

Q: If you buy a callable bond and interest rates decline, will the value of your bond rise by asmuch as…

A: Bond valuation refers to the evaluation of bond value at any point of time, which can be used for…

Q: Select all the correct statements. a. The no-arbitrage price of a bond is equal to its present…

A: An investor can profit from price differences of a security or asset between several exchanges or…

Q: In general, would a falling rate of market interest cause the price of an MPT security to increase…

A: To determine if the falling rate of market interest cause the price of an MPT security to increase…

Q: How is risk defined and measured? How might the magnitude of the market risk premium impact…

A: In financial terms, the risk is referred to as the possibility that an outcome's actual gains will…

Q: In today’s low interest rate environment and economic uncertainty, what bond duration strategy would…

A: Bond portfolio management strategies can help investors get the most of their portfolio, by actively…

Q: Which of these statements below are correct? (a) Small arbitrage opportunities may occasionally…

A: An investor can profit from price differences of a security or asset between several exchanges or…

Q: Why is it said that zero-coupon bonds lock in the reinvestment rate?

A: The objective of the question is to understand why it is said that zero-coupon bonds lock in the…