1. Holding all else equal, an unexpected fall in interest rates will cause the value of a given outstanding call option to __________.
a. increase
b decrease
c. none of the above
d. remain constant
2. Interest rate risk is apt to be highest for holders of __________.
a. T-bills
b. long-term bonds with high coupon interest rates
c. money market funds
d. long-term bonds with low coupon interest rates
3. A ratio that is important in bond credit analysis is the ___________ ratio, which is EBITDA divided by interest payments. This calculates how much operating income a company has to pay the ongoing debt service.
a. spread
b. retention
c. blanket
d. coverage