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Question

Consider the following statements:

I. Bonds are units of corporate debt issued by companies and securitized as tradeable assets.

II. Bond prices are positively correlated with interest rates.

III. National governments generally use the proceeds from bonds to finance infrastructural improvements

Which of the statements above is/are correct?

A I only Correct Answer Incorrect Answer
B II only Correct Answer Incorrect Answer
C III only Correct Answer Incorrect Answer
D I and III only Correct Answer Incorrect Answer
E II and III only Correct Answer Incorrect Answer

Solution

Statement I is correct -:  Bonds are units of corporate debt issued by companies and securitized as tradeable assets. Statement II is not correct -:  Bond prices are inversely correlated with interest rates: when rates go up, bond prices fall and vice-versa. Statement III is correct -:  National governments generally use the proceeds from bonds to finance infrastructural improvements and pay down debts.

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