1. A call option allows the issuer of a bond to force the redemption of the bond (final repayment of principal) before its maturity date. An issuer will most likely exercise this option when market interest rates have decreased and are significantly lower that the bond coupon rate.
a) True
b) False
2. Bond ratings are broken down into two fundamental categories. These are:
a) Investment grade and Speculative grade
b) Corporate Bonds and Treasury Bonds
c) Speculative Grade and Junk Bonds
d) A Grade and B grade