Quiz Ch 03 – T/F Duration and Bond Volatility
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Greater volatility is associated with a longer duration for a bond.
True or false: Greater volatility is associated with a longer duration for a bond.
True or false: The duration of a bond mirrors its maturity.
True or false: According to the expectations theory, a decreasing term structure is solely attributed to investors anticipating a decline in spot interest rates.
True or false: In the scenario of a flat term structure, the spot interest rate for 9 years equals the spot interest rate for 10 years.
True or false: Real interest rates have historically shown greater fluctuations than nominal interest rates over many years.
True or false: When considering the influence of inflation risk on the term structure of interest rates, an increased concern about inflation would likely result in a steeper, more upward-sloping term structure.
True or false: The introduction of inflation-indexed bonds in the United States was a rare occurrence before 1997.
True or false: In a well-functioning market, the law of one price dictates that the same commodity must be sold at an equivalent price.
True or false: A United States Treasury “strip” is effectively a zero-coupon bond.
True or false: The equation (1 + r_nominal) equals (1 + r_real)(1 + inflation rate), illustrating the connection between nominal and real interest rates.