Bond Investment Decision Based on your forecast

 Assignments # 5, week 5 Chapter 8 Question # 1, 2, 7, 8, and 9. 1. Bond Investment Decision Based on your forecast of interest rates, would you recommend that investors purchase bonds today? Explain. 2. How Interest Rates Affect Bond
        Prices Explain the impact of a decline in interest rates on: a. An investor’s required rate of return. b. The present value
        of existing bonds. c. The prices of existing bonds. 7. Coupon Rates If a bond’s coupon rate were above its required rate

        of return, would its price be above or below its par value? Explain. 8. Bond Price Sensitivity Is the price of a longterm
        bond more or less sensitive to a change in interest rates than to the price of a short-term security? Why? 9. Required

        Return on Bonds Why does the required rate of return for a particular bond change over time? Assignment 6 Chapter 9
        Question #s 2, 3, 4, 10, 11, 12, 16, 22. 2. Mortgage Rates and Risk What is the general relationship between mortgage

        rates and long-term government security rates? Explain how mortgage lenders can be affected by interest rate
        movements. Also explain how they can insulate against interest rate movements. 3. ARMs How does the initial rate on

        adjustable-rate mortgages (ARMs) differ from the rate on fixed-rate mortgages? Why? Explain how caps on ARMs can
        affect a financial institution’s exposure to interest rate risk. 4. Mortgage Maturities Why is the 15-year mortgage
        attractive to homeowners? Is the interest rate risk to the financial institution higher for a 15-year or a 30-year mortgage?

        Why? 10. Exposure to Interest Rate Movements Mortgage lenders with fixed-rate mortgages should benefit when interest
        rates decline, yet research has shown that this favorable impact is dampened. By what? 11. Mortgage Valuation

        Describe the factors that affect mortgage prices. 12. Selling Mortgages Explain why some financial institutions prefer to
        sell the mortgages they originate. 16. Mortgage-Backed Securities Describe how mortgage-backed securities (MBS)

        are.

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