Bonds do not carry default risk.
Bonds are sensitive to changes in the interest rates.
Moody’s and Standard and Poor’s provide information regarding a bond’s interest rate risk.
Municipal bonds are free of default risk.
None of the above is true
6. (TCO 8) Two years ago, Maple Enterprises issued six percent, 20-year bonds and Temple Corp issued six percent, 10-year bonds. Since their time of issue, interest rates have increased. Which of the following statements is true of each firm's bond prices in the market, assuming they have equal risk?
Maple's decreased more than Temple's
Temple's decreased more than Maple's
Maple's increased more than Temple's
They are both priced the same
7. (TCO 6) A sinking fund is an account managed by a bond trustee for the sole purpose of:
paying interest payments on a semi-annual basis.
redeeming bonds early.
repaying the face value at maturity.
paying the expenses required to reissue outstanding bonds.
paying the "balloon payment" at maturity.
This question was asked on Oct 21, 2010 and answered on Oct 21, 2010.
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