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- Which is riskier to an investor, other things held constant—a callable bond or aputable bond? Explain.Which of the following fixed income securities has the highest level of risk? Which one has the highest level of liquidity? a. treasury bonds b. agency bonds c. corporate bonds d. municipal bondsa. Explain the impact on the offering yield of adding a call feature to a proposed bond issue.b. Explain the impact on the bond’s expected life of adding a call feature to a proposed bond issue.c. Describe one advantage and one disadvantage of including callable bonds in a portfolio.
- 2. Term structure premium, an inflation of bond and bond default premium are included in A. risk factors B. premium factors C. bond buying factors D. multi modelWhich type of bond- a mortgage bond, a debenture, or a subordinated debenture- generally has the a. Highest cost to the bond issuer? B. least risk to the bond holder? c. highest yield to the bond holder?Which of the following types of debt securities protect investors against interest rate risk? a. extendible notes b. floating rate bonds c. floating rate bonds and extendible notes d. original issue deep discount bonds
- Describe in detail the key features of a bond (face value, maturity, coupon rate, coupon, yield to maturity, current yield). What are the cash flows associated with a bond? What is a discount bond? Premium bond? Par bond? How does the price of a bond vary in relationship to market rates?Default risk on bonds can be evaluated by using:A. financial analysisB. bond ratingsC. estimates of potential losses on bondsD. a and bWhat exactly does the coupon rate on a bond relate to? What range of S&P credit ratings are assigned to investment grade bonds?
- Explain the principle of immunization when used with a bond portfolio. What is bond portfolio immunization attempting to achieve? How is bond portfolio immunization achieved? Which two (2) bond risk components interact to make immunization successful? Explain how these bond risk components interact to immunize a bond portfolio as interest rates change.Explain the principle of immunization when used with a bond portfolio. a. What is bond portfolio immunization attempting to achieve? b. How is bond portfolio immunization achieved? c. Which bond risk components interact to make immunization successful? i. Explain how these bond risk components interact to immunize a bond portfolio.Briefly describe the mechanism which forces a bond to offer a default risk premium