Concept Check - Week 3
1. What is the relationship between a bond's price and its yield to maturity?
2. The risk-free interest rate for a maturity of n-years can be determined from the yield of what
type of bond?
3. If a bond’s yield to maturity does not change, how does its cash price change between coupon
payments?
4. What risk does an investor in a default-free bond face if he or she plans to sell the bond prior to
maturity?
5. How does a bond’s coupon rate affect its duration—the bond price’s sensitivity to interest rate
changes?
6. How do you calculate the price of a coupon bond from the prices of zero-coupon bonds?
, 7. Explain why two coupon bonds with the same maturity may each have a different yield to
maturity.
8. How do you calculate the price of a coupon bond from the yields of zero-coupon bonds?
9. There are two reasons the yield of a defaultable bond exceeds the yield of an Â.otherwise
identical default-free bond. What are they?
10. What is a bond rating?
11. Why do sovereign debt yields differ across countries?
12. What options does a country have if it decides it cannot meet its obligations?
13. How do you calculate the total return of a stock?
1. What is the relationship between a bond's price and its yield to maturity?
2. The risk-free interest rate for a maturity of n-years can be determined from the yield of what
type of bond?
3. If a bond’s yield to maturity does not change, how does its cash price change between coupon
payments?
4. What risk does an investor in a default-free bond face if he or she plans to sell the bond prior to
maturity?
5. How does a bond’s coupon rate affect its duration—the bond price’s sensitivity to interest rate
changes?
6. How do you calculate the price of a coupon bond from the prices of zero-coupon bonds?
, 7. Explain why two coupon bonds with the same maturity may each have a different yield to
maturity.
8. How do you calculate the price of a coupon bond from the yields of zero-coupon bonds?
9. There are two reasons the yield of a defaultable bond exceeds the yield of an Â.otherwise
identical default-free bond. What are they?
10. What is a bond rating?
11. Why do sovereign debt yields differ across countries?
12. What options does a country have if it decides it cannot meet its obligations?
13. How do you calculate the total return of a stock?
