Question

(Choose the correct sentence(s)

1. Say that call price is at 100% of the face value, the yield to call is a more conservative yield measure than the yield to maturity whenever

           A.      price of a callable bond is quoted at a value is bigger than its face value.

           B.      price of a callable bond is quoted at a value is same to its face value.

           C.     price of a callable bond is quoted at a value is smaller than its face value.

2. Choose a correct sentence(s)

A. Generally the pain from "regret of omission is stronger than the pain from "regret of commission".

B. Generally investors dislike uncertain loss more than certain loss when both have the same expected loss.

C.    Overconfidence bias induces investors to take up passive investment strategies.

Answer 1

1.

A.      price of a callable bond is quoted at a value is bigger than its face value.

Generally speaking, bonds are callable over several years. They are normally called at a slight premium above their face value, though the exact call price is based on prevailing market rates.

2.

A. Generally the pain from "regret of omission is stronger than the pain from "regret of commission".

Because errors of commission are easier to identify than errors of omission, many decision makers try to avoid making errors of commission by doing nothing. Although this increases their chances of making an error of omission, these errors are harder to detect

B. Generally investors dislike uncertain loss more than certain loss when both have the same expected loss.

uncertain loss hurts more since it comes out of nowhere and is sudden