AAII

1. Which bonds are affected by interest rates?

Treasury bonds

High-yield corporate bonds

Municipal bonds

All bonds

2. When interest rates go up, bonds prices also go up.

True

False

3. How is a bond’s interest rate risk correlated to its maturity?

The longer the maturity, the higher the risk of price fluctuations

The longer the maturity, the lower the risk of price fluctuations

4. A market in which interest rates are rising is:

Strong for bonds

Weak for bonds

5. Rising interest rates will cause you to lose money even if the bond is held to maturity.

True

False

6. Why wouldn’t your income go up if you swapped an older lower-coupon bond for a newer one with a higher coupon rate?

You would have to pay accrued interest on the new bond

You would have to sell your old bond for a lower price and would have less to reinvest

You wouldn’t be eligible to earn the stated interest rate on the new bond

QUIZ: Investing in Bonds