1- If you had invested in a diversified portfolio of long term junk bonds in at

Question

   1-If you had invested in a diversified portfolio of long term junk bonds in at the end of 2008 and held this portfolio until the end of 2013 you would have been financially ruined. (if ruin can be defined as a return of negative 4% per year).  

True

False

2-      Prices of risky corporate bonds generally fell relative to the ten year treasury note between October 2001 and June 2006.

True

False

3-     An investor who buys and sells government notes each day is assured of a certain return because treasury notes have no default risk and the coupon is fixed.

True

False

4-       As the number of assets whose returns are not perfectly correlated are added to a portfolio the risk of the portfolio will decline. The amount of risk reduction that can be achieved is limited. Assume that correlation coefficients between assets are not minus 1.

True

False

5-    When a market is efficient the prices in the market will eventually reflect all available information. Some markets are more efficient than others and information I more readily reflected in asset prices.

True

False

6-       An investor who buys one year treasury notes in year 1 and then rolls over the principal into new investments in one year treasury notes every year for 30 years will have locked in certain annual rate of return for 30 years.

True

False

7-    Prices of risky corporate bonds generally fell from November 2008 to November 2013.

True

False

8-      The annual yield investors demanded in November of 2008 from Baa rated bonds was 9.21% while in June of 2006 the required annual yield on these securities was 5.25%.

True

False

please do not guess.

Explanation / Answer

1]FALSE

2]TRUE

3]TRUE.

4]TRUE.

5]TRUE.

6]TRUE.

7]TRUE

8]TRUE.

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