FIN 351 CHAPTER 12 QUIZ 46 TO 50

FIN 351 CHAPTER 12 QUIZ 46 TO 50
46. The impact of interest rate changes on bond prices can be magnified by
A. Investing in speculative high risk-high yield bonds
B. Investing in higher-quality corporate bonds
C. Investing in short-term bonds
D. More than one of the above
47. The investor in deep-discount bonds generally accepts a lower yield because of
A. The unique conversion feature associated with deep-discount bonds
B. The extremely low risk of a call
C. The fact that the return represents pure interest income
D. More than one of the above
48. As the economy recovers from a recession, what changes can be expected in the yield spread of corporate Baa bonds and U.S.
government bonds?
A. The yield on Baa bonds will approach that of government securities
B. The yield spread between U.S. government bonds and BBB corporate bonds will stay the same
C. The yield spread will increase
D. Either a or b will occur
49. The term "swap" refers to
A. Selling low yielding bonds and buying higher yielding bonds
B. Exchanging debt and equity instruments
C. Exchanging bonds for other bonds with similar attributes
D. None of the above
50. Swaps may be utilized to take advantage of
A. A capital loss
B. A disequilibrium in bond prices
C. Conversion privileges
D. All of the above