# Fixed Income - Fixed Income Section 1

>>>>>>>>Fixed Income Section 1

• A

straight line relationship.  • B

convex relationship.  • C

concave relationship.  • Option : B
• Explanation : The price-yield relationship for an option-free bond is a convex relationship.

• A

Coupon rate < Market discount rate.  • B

Coupon rate = Market discount rate.  • C

Coupon rate > Market discount rate.  • Option : C
• Explanation : When the coupon rate is greater than the market discount rate, the bond is priced at a premium above par value.

• A

increases over time.  • B

decreases over time.  • C

is unchanged.  • Option : A
• Explanation : Assuming that the discount rate does not change, a bond’s value: *decreases over time if the bond is selling at a premium. *increases over time if the bond is selling at a discount. *is unchanged if the bond is selling at par value.

• A

bond A will have greater price volatility.  • B

bond B will have greater price volatility.  • C

both bonds will have the same price volatility.  • Option : B
• Explanation : All else equal, the longer the term to maturity the greater the price volatility.

• A

bond A will have greater price volatility.  • B

bond B will have greater price volatility.  • C

both bonds will have the same price volatility.  • Option : B
• Explanation : All else equal, the lower the coupon rate, the greater the price volatility.
Related Quiz.
Fixed Income Section 1