True or False

Provide atleast 5 sentences each question explaining why the statment is true or false.

1. If bond portfolio managers expect interest rates to increase in the future, they would likely to decrease their holdings of bonds now, which could cause the prices of bonds to increase as a result of their actions.

2. If the level of inflation is expected to increase, there will be an upward pressure on interest rates and upward pressure on the required rate of return on bonds. Therefore, portfolio managers will decrease the holding of bonds portfolio

3. If interest rates suddenly decline, those existing bonds that have a call feature are more likely to be called the issuer will pay the difference between the market value of bond and par value which is called the call premium.