University of Arkansas ECON 101 PFP Chapter 16 Exam Review Test Answered 100% Correctly!

1. As bond maturity increases, the bond's risk: A. Increases. B. Decreases. C. Does not change. D. Sometimes increases and sometimes decreases. E. Is inversely related to the value of the bond. 2. The relationship that exists between bond maturity and risk can be explained through observing that: A. The longer the period, the greater the potential for a change in the ability of a company to repay its debt. B. A broad-based change in interest rates will have a greater effect on long-term bonds. C. The shorter the period, the greater the potential for a change in the ability of a company to repay its debt. D. Both a and b. E. Both b and c. 3. For which of the following categories of bonds is the risk for a given change in interest rates generally classified as low? A. Money market. B. Short term. C. Intermediate term. D. Long term. E. None of the above. 4. For which of the following is a bond's classification based on the likelihood that the bond will fulfill its obligation to pay interest and repay the amount owed at maturity? A. Duration. B. Risk. C. Quality. D. Credit. E. None of the above. 5. Below which of the following is a bond rating regarded as a high-yield bond or a junk bond with a chance of default which typically results in bankruptcy? A. AAA. B. BBB. C. CCC. D. C. E. None of the above. 6. Of the following bond ratings, which are classified as medium quality? A. B. B. BBB. C. A. D. Both a and b. E. Both b and c. This study source was downloaded by from CourseH on :35:32 GMT -06:00 7. What is liquidity? A. The ability to convert an asset into cash quickly and at a relatively low transaction cost. B. The possibilit