Question

True or False

6. Lack of clarity about the future may lead to an increase in the maturity premium.

7.A bond's rating effects its liquidity premium.

8. A sinking fund benefits a bond investor.

9. Private equity firms almost never use leveraged buy outs.

10.An investor who purchases a call option likely expects the price of the security to fall within the timing of the option.

Answer 1

6. Lack of clarity of future leads to maturity premium - True as higher the risk higher the premium

7. Bonds rating affects credit risk and not liquidity risk -

Hence given statement is False

8. A sinking fund benefits bond investor

True as the fixed % is being repaid each year thereby reducing the debt and risk

9. Given statement is false, as leveraged buyouts are most often used by private equity firms

10. An investor purchasing call, is long on the stock and expects prices to rise

Given statement is false.