Multiple choice

1. Some securities are called junk bonds because

A. they have a high risk of default and the debt is unsecured.

B. they have secured by equipment-type collateral rather than by cash.;

C. they are issued by foreign companies.

D. the companies that issue them have inadequate amounts of debt in their corporate structures.;

2. The specific type of risk that is measured by bond ratings is

A. interest rate risk.;

B. market risk.;

C. purchasing power risk.

D. default risk.;

3. The most common yield curve is upward sloping, which means that

A. the nearer the call date, the more volatile the bond price will be.;

B. yields tend to increase with longer maturities.

C. yield spreads tend to increase over time.

D. default risk increases with maturity.

4. According to the expectation hypothesis, investors' expectations of increasing inflation will result in

A. an upward-sloping yield curve.;

B. a flat yield curve.;

C. a downward-sloping yield curve.;

D. a humped yield curve.