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FI 312 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

A commitment of cash into a business, bank account, real estate, stocks, bonds, or other asset, usually for the purpose of obtaining income and/or a profit.

A

Investment

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2
Q

Lending money to an individual, bank, credit union, corporation, or government.

A

Lending Investments

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3
Q

What is a lender promised from a lending investment? (2):

A
  • Contractual interest payments

- Return of principal either on demand or a maturity date

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4
Q

When do lending investments have low and high default?

A

Government issued bonds are promised the payments and have low risk. Personal loans, company bonds, etc. have a risk of default because they are not promised an amount of money/return

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5
Q

T/F

The promised return is the most that you can earn per year if you hold the investment until the maturity date

A

True

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6
Q

Including stocks, stock mutual funds and ETFs, precious metals, and real estate involving legal ownership of a business or real property

A

Ownership Investment

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7
Q

Which has more risk and return, ownership investment or lending investment?

A

Ownership investment entails more risk but higher potential returns

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8
Q

How are lending investments interest and principal determined?

A

Interest and principal payments are set by contract and are generally fixed

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9
Q

Where do returns come from? (3):

A
  • Income received from holding the asset
  • Like a dividend on a stock or a coupon on a bond
  • Gains and losses in the market price of the asset, called capital gains and losses
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10
Q

How is risk measured?

A

The standard deviation of the total return on the asset over the next year

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11
Q

For an investor that holds a reasonably diversified portfolio, the most important measure of the risk of an asset is the ______ between the returns on that asset and the returns on the entire portfolio

A

Covariation

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12
Q

The ability to convert an asset to cash on short notice at a fair price.

A

Liquidity

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13
Q

An investment that the fund reasonably expects cannot be sold in current market conditions in seven calendar days without significantly changing the market value of the investment

A

SEC definition of an illiquid investment

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14
Q

When are capital gains and losses taxable?

A

Only when realized, and the tax rate is reduced if the asset is held for more than one year

(As a result, active traders often bear higher tax burden than do buy-and-hold investors)

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15
Q

What is exempt from federal income taxation?

A

Interest on most municipal bonds and bonds issued by state and local governments

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16
Q

What is and is not taxed at the state level?

A

Common stock dividend income is, treasury bond interest is not

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17
Q

What is taxed at a lower federal tax rate than coupon income on treasury and corporate bonds?

A

Dividends on common stocks and many preferred stocks

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18
Q

When are returns in accounts (like 401k, IRA, etc.) taxed?

A

They are not taxed while in the account but then taxed at ordinary rates upon withdrawal

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19
Q

If you want a high expected after-tax return, you must…

A

Bear relatively high risk or low liquidity

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20
Q

The percentage of the portfolio invested in each of multiple broad asset categories

A

Asset allocation

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21
Q

First forecasting future macroeconomic conditions, then industry conditions, and then identifying the best stocks or bonds within the best industries

A

Top-Down Approach

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22
Q

Starts at the individual stock (or bond) level, looking for attractive characteristics, and then building the portfolio as a collection of those stocks

A

Bottom-Up Approach

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23
Q

The strategy of changing asset allocation between stocks, bonds, real estate, and money market securities in response to changes in perceived risks and expected returns

A

Market Timing

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24
Q

The strategy of shifting stock investments among industries, such as financials, utilities, and technology, in response to industry trends and stock valuations

A

Sector Rotation

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25
Q

Within a particular industry, the investor buys those stocks with the best expected return-to-risk tradeoffs, and avoids the others

A

Security Selection

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26
Q

Assumes stock and bond markets are efficient, or are not so inefficient to make it worth spending the resources required to exploit the inefficiencies, try to do as well as the overall market

A

Passive Investment Strategy

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27
Q

Annual percentage increase in the prices of a market basket of goods and services

A

Inflation Rate

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28
Q

Real Rate of Interest Equation:

A

(1 + Nominal Interest Rate)/(1 + Inflation Rate) - 1

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29
Q

The actual interest rate paid on the investment

A

Nominal Interest Rate

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30
Q

The annual rate at which a saver builds up purchasing power, or the annual rate at which a borrower surrenders purchasing power

A

Real rate of interest

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31
Q

What is income tax levied on -

nominal interest income or real interest income?

A

Nominal Interest Income

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32
Q

Short-term lending investments

A

Money market securities

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33
Q

A comparable alternative to a savings account at a bank or credit union

A

Money market fund

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34
Q

Zero-coupon, default-free obligations of the U.S. government

A

Treasury Bills

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35
Q

The implied rate of interest based on the highest price that the dealer is willing to pay to buy the T-Bill from someone

A

Bid Rate

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36
Q

The implied rate of interest based on the lowest price that the dealer is willing to accept to sell the T-Bill to someone

A

Ask Rate

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37
Q

With bid and ask prices, the ___ is always higher than the ___

A

Ask is always higher than the bid

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38
Q

By law, banks and credit unions must publish the ___ on all deposit accounts, which allows for a fair comparison across accounts that use different compounding intervals, like daily versus quarterly

A

APY

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39
Q

The APY will always be greater than or equal to the ____ for t-bills

A

bond equivalent yield

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40
Q

What is the safest/most liquid security available?

A

Treasury Bills

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41
Q

Interest earned on t-bills is taxable at the ___ level, but is exempt from income taxation at the __ and __ level

A

Federal

State and Local

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42
Q

Interest earned on Fannie and Freddie paper is taxable at ___ level(s)

A

federal level, and also taxable at the state and local level for states and localities with income taxes

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43
Q

Municipal bonds interest is exempt from…

A

federal income tax

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44
Q

When are municipal bonds exempt from state income tax?

A

If the investor and issuer are both from the same state

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45
Q

A municipal security that generally has a long maturity of 10 years or more, but the interest rate resets frequently, and holders are able to liquidate their security through a “put” or “tender” feature, at par.

A

Variable Rate Demand Obligation (VRDO)

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46
Q

Essentially, at each interest rate reset date, the municipality must pay a competitive interest rate to investors based on current market conditions, or the investors will..

A

Demand their money back

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47
Q

An unconditional commitment by a bank to pay investors the principal and interest on the VRDOs, if the municipality is short of cash

A

Bank’s letter of credit

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48
Q

Short-term, promissory notes issued primarily by corporations, including many foreign corporations.

A

Commercial Paper (CP)

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49
Q

Commercial Paper maturity max and average

A

Up to 270 days but the average is 30-60 days

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50
Q

Primary buyers of commercial paper (4):

A

Mutual funds, banks, insurance companies, and pension funds

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51
Q

Where repayment is based on the cash flows of an underlying pool of financial assets

A

Asset-backed commercial paper

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52
Q

Houses the assets and issue the commercial paper, a sponsor (typically a bank)

A

Special Purpose Entity (SPE)

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53
Q

Pool of loans, such as consumer credit card receivables, auto and equipment loans, manufactured housing loans, or auto dealer floor plan loans

A

Asset pool

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54
Q

To protect asset-backed CP buyers, often the amount of the CP issues is less than the total amount of principal in the loan pool, known as ____.

A

Overcollateralization

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55
Q

Short term credit ratings from best to worst (7):

A 
A+
A
AA
AAA
B
C
D
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56
Q

Interest earned on commercial paper is taxable at the ___ level and also the ____ level for states and localities with income taxes

A

Federal

State and local

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57
Q

Time deposits issued by banks in denominations of multi-millions or even billions of dollars

A

Large-denomination CDs (Jumbo CDs)

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58
Q

Where are jumbo CDs tradable?

A

In the secondary market and are generally negotiable

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59
Q

Unlike retail CDs, negotiable CDs (jumbo) cannot generally be…

A

Withdrawn before maturity

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60
Q

FDIC insures up to..

A

$250,000

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61
Q

The typical difference between the bid and ask rates for CDs is around ____

A

5 basis points

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62
Q

A CD issued by a U.S. branch of a foreign bank

A

Yankee CD

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63
Q

A CD denominated in U.S. dollars issued by a bank in a different country

A

Eurodollar CD (unsecured)

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64
Q

The sale of a security with an agreement to buy the security back at a set price in the future

A

Repurchase Agreement (repo or RP)

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65
Q

The purchase of a security with an agreement to sell the security back at a set price in the future

A

Reverse Purchase Agreement

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66
Q

Short-term (mostly overnight) unsecured loans between banks

A

Federal Fund Transactions

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67
Q

Average interest rate on fed funds

A

Fed funds rate

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68
Q

When the fed wants to increase market interest rates to reduce inflation, it will…

A

Sell treasury securities to banks

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69
Q

Average cost to large banks of borrowing U.S. dollars in London on an unsecured basis

A

LIBOR (London Interbank Offered Rate)

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70
Q

An interest rate benchmark used as a reference rate to set interest rates on financial products such as mortgages and private student loans

A

LIBOR

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71
Q

The difference between the 3-month LIBOR rate and the yield on a 3-month treasury bill. It measures the default risk perceptions of investors, specifically the default risk of lending money without collateral to large banks.

A

TED (Treasury EuroDollar)

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72
Q

Pool and invest individuals’ money into financial assets

A

Mutual Funds

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73
Q

An annual fee, as a percentage of assets under management

A

Expense Ratio

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74
Q

Sales charges, which are levied when either buying or redeeming shares from the fund sponsor

A

Loads

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75
Q

Net Asset Value per share (NAV) formula:

A

NAV = [Fund Assets - Fund Liabilities]/(# of Shares Outstanding)

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76
Q

The true value per share of the underlying investments held by the fund, less any liabilities

A

NAV

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77
Q

Investors earn a profit or a loss from mutual fund investments from a combination of (2):

A
  1. Capital gain or loss between the time of purchase and sale, when depends on the movement in the NAV of the fund
  2. Distributions to shareholders of income earned by the fund, including interest, dividends, and capital gain
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78
Q

A money market mutual fund (MMF) is required by law to..

A

Invest in money market securities

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79
Q

Money market funds are not ___ and never have ___

A

FDIC-insured

sales loads

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80
Q

All money market funds invest in money market securities, but typically specialize based on..

A

The type of security (corporate, treasury, U.S. government, municipal) purchased

81
Q

Prime funds usually pay ______ than other types of MMFs

A

higher before-tax yields

82
Q

Safest investment around

A

Treasury Bills

federally taxed but exempt from state and local

83
Q

MMFs are not allowed to buy securities with maturities of ___ or more

A

397 days or more

84
Q

MMFs are required by law to maintain a weighted average maturity (WAM) of less than ___ days

A

60 days

85
Q

Weighted average life (actual maturity) must be kept below ___ days

A

120 days

86
Q

T/F

There has never been a default on a U.S. government agency debt security

A

True

87
Q

MMFs cannot invest more than ___ of their assets with any issuer (except the U.S. government and government agencies)

A

5%

88
Q

In an extreme situation, it is possible that the MMF share price could fall below $1 if (2):

A
  1. The value of the investments held by the MMF fell drastically
  2. There was a rush to redeem shares

This is called “breaking the buck”

89
Q

Choosing a money market fund:

Historical returns what do you look at?

A

Look for a fund that earns returns above the average for its peer group over the past 5 years.

Compare apples to apples -
U.S. treasury fund to other U.S. treasury funds and a national municipal fund to other national municipal funds

90
Q

What funds have the highest credit quality?

A

U.S. treasury funds

91
Q

Lending investments that have longer original maturities than money market securities

A

Bonds

92
Q

T/F

All bonds promise the return of principal at the maturity date

A

True

93
Q

The principal on a bond is also called the face value or ___

A

Par value

94
Q

Each interest payment is called a ___

A

Coupon

95
Q

The percentage of the par value paid each year in interest

A

Coupon Rate

96
Q

Suppose a bond has a $1000 principal or par value and pays a 5% coupon. How much is the coupon?

A

(.05/2)$1000 = $25 in coupon payments each 6 months

$50 per year

97
Q

Bonds that pay variable coupons, with the amount of the coupon tied to a short-term interest rate in the market

A

Floating-Rate Bonds

98
Q

If a promised interest or principal payment is not made to the bondholder as scheduled, the bond is in ___

A

Default

99
Q

How many years are…

Short-term bonds?
Intermediate-term bonds?
Long-term bonds?

A

Short-term bonds are 2-3 years or less
Intermediate-bonds are 3-10 years
Long-term bonds are greater than 10 years

100
Q

Coupon Bond Example

Suppose the current date is May 15, 2018 and the treasury sells me a new, 8% coupon, $1000 par treasury bonds that matures on May 15, 2021. What are the coupon payments?

A

.08(1000)/2 = $40 each 6 months

and also the $1000 principal on May 15, 2021

101
Q

The return now offered by already-issued bonds of the same type, similar maturity, and similar risk

A

Prevailing market interest rate

102
Q

The annualized return from buying a bong and holding it until maturity, assuming no default.

A

Yield to Maturity (YTM)

103
Q

YTM is mathematically equivalent to the..

A

Internal rate of return (IRR)

104
Q

The higher the price of the bond in the market, the ____

A

Lower the YTM

105
Q

The invoice or actual price of the bond is calculated as:

A

Invoice (actual) price = Flat (quoted) price + Accrued Interest

106
Q

Accrued Interest Formula:

A

Accrued Interest = Semiannual Coupons x (days Since last coupon/days separating coupons)

107
Q

Bonds that do not pay coupons

A

Zero-coupon bonds

108
Q

The difference between the price originally paid and the par value of the bond at maturity represents…

A

The implicit interest earned by the investor

109
Q

For investors with long horizons, any coupon payments will be reinvested rather than spent, creating a ____

A

Reinvestment risk

110
Q

When sold to the public, treasury bonds have maturities of ___ years

A

30

111
Q

Treasury notes are otherwise identical to treasury bonds, but have original maturities of ______ years

A

2, 3, 5, 7, or 10

112
Q

U.S. treasury floating rate notes (FRNs) have a ____ maturity

A

2 year

113
Q

The interest rate earned (accrued) every week on FRNs is variable, and is equal to..

A

The auction rate on new 13-week T-bills, plus a fixed spread

114
Q

Who is the clientele for FRNs?

A

Investors that want to receive a variable interest rate that adjusts every week, but want to avoid the costly effort of quarterly participation in 13-week Treasury Bill auctions

115
Q

FRN investors are willing to give up some ___ to obtain a slightly higher ____ and reduce the time and expense of participating in quarterly auctions

A

Liquidity

Yield

116
Q

Zero-coupon, default-free obligations of the U.S. government with maturities of up to 30 years

A

Treasury Strips

117
Q

Strips are not auctioned by the Treasury, but are constructed by…

A

Dividing or “stripping” apart the coupon and principal payments from already-issued Treasury Bonds and Notes

118
Q

Strips must be purchased by using a ___ or indirectly through a ____.

A

Stockbroker

Mutual Fund

119
Q

Since there is only one future cash flow, a treasury strip YTM is a ______ for that maturity date

A

“Pure” risk-free interest rate

120
Q

Zero-coupon bonds are suitable investments when there is no need for _____, and the investor wants to lock in a ______, eliminating the reinvestment risk inherent in coupon bonds

A

Annual Income

Multiyear return

121
Q

Measures the annual increase in the prices of a market basket of goods and services purchased by the typical consumer

A

Inflation Rate

122
Q

If the coupon on a bond is 5% and inflation is 3%, the real return on the bond is only about ___

A

2%

123
Q

Designed to protect bond investors from the effects of inflation

A

Treasury Inflation Protected Securities (TIPS)

124
Q

The inflation-adjusted principal is called the ____

A

Accrued principal

125
Q

The ___ the inflation rate, the faster the ___ increases, and the more you receive back as principal at maturity

A

Higher

Principal

126
Q

TIPS prices are quoted as a percentage of the ___ principal

A

Accrued

127
Q

Suppose you buy a 10-year, 3% coupon (1.5% per six months) inflation-indexed bond when issued for $1000 in January 2018. What are the accrued principal and semi-annual coupon payments over the upcoming year for the following inflation rates?

7/18 - 1% CPI increase
1/19 - 3% CPI increase

A

Accrued Principal:

7/18 - 1010
1/19 - 1040.3

Coupon:

7/18 - 15.15
1/19 - 15.60

128
Q

For TIPS, the higher the realized inflation rate, the more ______ on the inflation portion of your return, and the lower will be your after-tax real return

A

Taxes you will pay

129
Q

The inflation rate that equates the realized annual returns from the two alternative investments

A

Breakeven inflation rate

130
Q

The breakeven rate may not perfectly reflect the market consensus inflation expectation, because TIPS clearly have ____ than regular treasuries, so TIPS yields should be ____ as a result

A

Less inflation risk

Lower

131
Q

Debts of corporations

A

Corporate Bonds

132
Q

Most corporate bonds promise coupons _____ with principal repayment at the ___

A

Semiannually

Maturity date

133
Q

The most important difference between Treasury and corporate bonds is that the latter carry a ___ in their yields to compensate investors for the risk of default

A

Premium

134
Q

In bankruptcy, the interest and principal payments might be _____ on ____ favorable terms to the bondholder, or the assets of the company might be ___, with bondholders receiving ___ than promised

A

Renegotiated on less
Liquidated (sold)
Less

135
Q

If you buy a corporate bond and hold it all the way until maturity, the most you can earn is..

A

The YTM on the bond when you buy it

136
Q

If the bond defaults, the actual return will be ___ than the ___ YTM when purchased

A

Less

Promised

137
Q

All else equal, bonds of ____ are usually safer investments than bonds of ____, due to more diversified operations

A

Larger companies

Smaller companies

138
Q

Profitability is typically measured by ___ by bond rating agencies

A

EBIT/Sales

139
Q

Companies with low levels of _____ have more stable profits, for a given volatility in their sales

A

Fixed costs versus variable costs

140
Q

Interest-bearing debt divided by stockholder’s equity

A

Debt/Equity ratio

141
Q

Measures interest-bearing debt relative to pre-tax cash flow available to pay interest on the debt

A

Debt/EBITDA ratio

142
Q

Measures interest expense in relation to the profits of the business

A

Interest Coverage

143
Q

Interest Coverage formula:

A

EBIT/Interest Expense

144
Q

___ and ___ history are reassuring to bondholders

A

Conservatism (using little debt) and rapidly paying back debts

145
Q

Some bonds, generally called mortgage bonds, have specific assets pledged as ___ for the debt

A

Collateral

146
Q

If the company defaults on a mortgage bond, bondholders can seize the collateral, and repay themselves from..

A

The proceeds of the sale

(Any excess proceeds go back to the issuer, or alternatively, the bondholders become general creditors for the amount of any deficiency)

147
Q

Bonds that do not have any specific pledged collateral are called ___

A

Debentures

148
Q

Generally has the first claim on any unplugged assets of the company in a default

A

Senior bond

149
Q

Receive nothing until the senior lenders have been repaid in full

A

Junior or subordinated bonds

150
Q

Qualitative measure of default risk

A

Rating

151
Q

Highest S&P bond rating is..
Next highest..
Lowest ratings are..

A

Highest: AAA
Next highest: AA, then A, then BBB, BB, and B
Lowest: C and D (bonds in default)

152
Q

Corporate bonds that have ratings of at least __ or __ are called investment-grade bonds

A

Baa

BBB

153
Q

Bonds with ratings of __ or __ or lower, or bonds with no ratings at all, are called high-yield or speculative-grade or junk bonds

A

Ba

BB

154
Q

The ___ the bond rating, the ___ the risk of default, and thus the higher the ___ required by investors

A

Lower
Higher
YTM

155
Q

Investors should purchase junk bonds or junk bond mutual funds only when their yields are significantly ______ on Treasury Bonds

A

Above the yields

156
Q

Debts of states and municipalities (cities, counties, school districts, etc.), used to provide funding for roads, sewer plants, schools, or other public projects

A

Municipal Bonds (munis)

157
Q

Munis are often issued in the form of ____

A

Serial bonds

158
Q

____ bonds “are said to entail the full faith and credit (and in many cases the taxing power) of the issuer, depending on the applicable state or local law”

A

General Obligation (GO) Bonds

159
Q

____ bond “is a bond that is payable from a specific source of revenue. Pledge revenues may be derived from operation of the financed project, grants, or excise or other specific non-property tax”

A

Revenue bond

160
Q

An example of a revenue bond is a water and sewer bond, where revenue from water and sewer bills is used to..

A

Pay interest and repay principal

161
Q

In general, the default risk of ___ is lower than the default risk of ___, since states and municipalities have the power to levy taxes

A

General Obligation municipal bonds

Corporate bonds

162
Q

One major attraction of municipal bonds for the investors is a..

A

Tax break

163
Q

Investors are usually willing to accept lower ____ yields on high-quality municipal bonds than on other types of bonds

A

Pre-tax

164
Q

Debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property

A

Mortgage-backed securities (MBS)

165
Q

Entitle the holder to a pro-rata share of all principal and interest payments made on the pool of loan assets

A

Pass-through participation certificates

166
Q

Designed to protect investors from or expose investors to various types of risk

A

Collateralized Mortgage Obligations (CMO)

167
Q

In the United States, bonds trade in a _____ market

A

Decentralized dealer

168
Q

Two advantages to having a bank, broker, or dealer sell your bond:

Two disadvantages:

A
  1. You receive an interest rate just as high as large, sophisticated investors receive
  2. You pay no commissions on bond purchases
  3. Investment flexibility (you can only buy when there is a Treasury auction)
  4. Complication of a transfer to a broker if you want to sell bonds before maturity
169
Q

What is the T+2 rule?

A

The broker must receive investor’s cash for a bond purchase within two business days of trade execution

170
Q

Bond investors are taxed on ____ and also on ____

A

Interest earned

Capital gains or losses

171
Q

The tax rate you pay on your last dollar of income

A

Marginal tax rate

172
Q

Corporate bonds offer no ____ to investors

A

Tax breaks

173
Q

After-tax yield formula:

A

After-tax rate of return = Before-tax return(1- tax rate)

174
Q

Suppose the Treasury Bond yield is 7% and the municipal bond yield for bonds in your state of residence is 5%. If you are in the 15% tax bracket, what is your after-tax yield on the T-bond?

A

7%(1 - .15) = 5.95%

175
Q

Suppose you have a 36% federal tax rate and a 6% state income tax rate, and you can get a 7.5% yield on a corporate bond. What is the after-tax yield on the corporate bond if you do not itemize your deductions on your federal tax return?

What if you itemize and are under $10,000 limit on state and local taxes?

A

After tax yield:

7.5%(1 - .06 - .36) = 4.35%

Itemize:

7.5%(1 - .06 - (1 - 0.6).36) = 4.512%

176
Q

Don’t consider buying a municipal bond, or muni mutual fund, unless your Federal tax bracket is __ or higher

A

25%

177
Q

Real Rate after Taxes formula:

A

[1 + Nominal Interest Rate(1 - tax rate)]/(1 + Inflation Rate) - 1

178
Q

Interest earnings from coupons, plus any capital gain or loss are added together to give the ____ return on a bond investment

A

Total holding-period

179
Q

The price or value of a bond is just the present value of the _______ to be received through the maturity date, using the current ___ interest rate for bonds that have approximately the same risk and maturity as the bond being priced

A

Coupons and principal

Market

180
Q

Zero-coupon bond pricing formula:

A

Bond Price = PV(Principal)

181
Q

Regular coupon-bearing bonds pricing formula:

A

Bond Price = PV(Coupons) + PV(Principal)

182
Q

Suppose you have a Treasury Bond with $1000 principal that pays a 6% annual coupon and has 10 years to maturity. If the annual interest rate in the market is 6% for other bonds of similar risk and maturity, what is the present value or price of the bond? Assume coupons are paid annually.

A

Bond Price = PV(Coupons) + PV(Principal)
Bond Price = 60[1-(1.06)^-10] / .06 + 1000/(1.06)^10
Bond Price = $442 + $558 = $1000

183
Q

The longer the maturity of a bond, the _____

A

Greater the interest rate risk

184
Q

Safer investment

Short-term or long-term bond?

A

Short-term

185
Q

The weighted average of the times to receipt of each cash flow on the bond, with weights equal to the proportion of the total value attributable to that individual payment

A

Duration (Macaulay Duration)

186
Q

Duration is higher when coupon rate on the bond is ___

A

Lower

187
Q

A lower coupon rate means that the bond’s cash flows are more _____, and hence the PV-weighted average cash flow receipt is longer

A

“back loaded”

188
Q

Duration decreases as ___ increases

A

YTM

189
Q

Measures wholesale rather than retail prices, and the GDP price deflator

A

Producer Price Index (PPI)

190
Q

When inflation increases or is expected to increase, what else increases?

A

Interest rates

191
Q

If interest rates do not keep up with inflation, people will spend their savings or buy..

A

Other “hard” assets such as real estate or gold

192
Q

Higher expected inflation generally leads to ___ bond prices

A

Lower

193
Q

Measures the total output of the U.S. economy

A

GDP

194
Q

If real GDP declines for two quarters in a row, the economy is said to..

A

Be in a recession

195
Q

With higher interest rates in the market, the prices of existing bonds..

A

Go down

196
Q

Treasury bond investors typically ___ when the economy worsens, and ___ when the economy improves

A

Book a profit

Book a loss

197
Q

Treasury bond investors earn capital gains when..

A

Treasury yields fall

198
Q

Lower bond price = higher ___

A

YTM

FI 312 (4 decks)

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