Question Details

Bond prices jumped because if the deficit is reduced 



1. "The bond market's benchmark security, the 30-year Treasury bond, rose $12.50 for every $1,000 face amount. The bond's yield ______ from _____ to 5.69%." The blanks are best filled with 
a) rose; 4.44% b) rose; 5.65% c) fell; 6.94% d) fell; 5.73% 
2. "Some portfolio managers were forced to buy securities in the 10-year to 30-year sector to meet targeted returns for the month and to extend duration, traders said." A higher duration most likely implies 
a) higher returns and more sensitivity of the portfolio to interest rate changes 
b) lower returns and more sensitivity of the portfolio to interest rate changes 
c) higher returns and less sensitivity of the portfolio to interest rate changes 
d) lower returns and less sensitivity of the portfolio to interest rate changes 
3. "A 20-year government bond paying 10.25 percent was selling for $1,007.10, priced above its par value of $1,000 to yield 10.15 percent." The coupon on this bond is 
a) $101.50 and the current interest rate is 10.15 percent 
b) $101.50 and the current interest rate is 10.25 percent 
c) $102.50 and the current interest rate is 10.15 percent 
d) $102.50 and the current interest rate is 10.25 percent 
4. "Prices in all areas of the bond market traded in a narrow range for most of the week, but jumped sharply yesterday morning in reaction to the news that the U.S. Senate voted to approve specific deficit reduction measures." Bond prices jumped because if the deficit is reduced 
a) interest rates should fall b) interest rates should rise 
c) unemployment should fall d) unemployment should rise 
5. “Over the past six years, the government's share of total borrowing in the U.S. credit markets has fallen to 6% from 60%. That has played a major role in _____ interest rates.” The blank is best filled with 
a) stabilizing b) increasing c) decreasing d) inflation-proofing




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