Exploring Yield and Rising Interest Rates

What is the basic definition of yield in the context of bonds?

• The total amount earned from a bond over a set period.

• The duration of the bond.

• The initial price paid for the bond.

• The creditworthiness of the bond issuer.

Which factor does NOT influence the price of a bond?

• Inflation rate

• The color of the bond certificate

• Creditworthiness of the issuer

• Overall economic outlook

What happens to bond prices when yields rise?

• Bond prices become unpredictable

• Bond prices rise

• Bond prices fall

• Bond prices remain the same

If you buy a bond for $1,000 with a 6% coupon, how much interest do you earn annually?

• $100

• $50

• $70

• $60

What happens to the price of a 6% bond if market yields increase by 1%?

• The price doubles

• The price falls

• The price rises

• The price remains the same

What does the term 'duration' measure in relation to bonds?

• Sensitivity to interest rate changes

• The creditworthiness of the issuer

• The total yield over time

• The initial price of the bond

If a bond has a four-year duration, how much would its price change for a 1% change in yield?

• 4%

• 1%

• 2%

• 6%

What is a good rule of thumb for choosing the duration of a bond fund?

• Ignore the investment time horizon

• Half your investment time horizon

• Double your investment time horizon

• Match it to your investment time horizon

What can investors do to offset the fall in bond prices?

• Ignore the market changes

• Sell the bond immediately

• Reinvest coupon payments at the new higher yield

• Buy more bonds at the same yield

Where can you learn more about fixed income investing?

• Talk to a financial advisor

• Watch a movie

• Visit a museum

• Read a novel