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Bonds of different risk classes have a spread between their interest rates. Is this spread always the same? Why? Illustrate.
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- The yield spread between two bond issues reflect more than just credit risk. What other factors would the spread reflect?Explain the term structure of interest rates and the relationships measured? Why is it important for all securities plotted on a given term structure to have equal default risk?Bond prices are inversely related to market interest rates. TRUE FALSE.
- 1. What is the relationship between interest rate level and bond price? Why must this relationship be true? How has the current rate environment impacted the prices of bonds?In the bond market, provide a list of the variables that influence the equilibrium interest rate and explain why they are important.Why is the required rate of return on a bond different than the copoun rate
- What happens when the bond's market rate is greater than the stated rate?Money duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True FalseInterest Rate risk depends upon how sensitive the bond price is to interest rate changes (i.e., maturity and coupon rate). T/F