Given the bond described above, if interest were paid semi-annually (rather than annually), and the bond continued to be priced at $850, the resulting effective annual yield to maturity would be $\begin{array}{lc} \text { Par Value } & \$ 1,000 \\ \text { Time to Maturity } & 20 \text { Years } \\ \text { Coupon } & 10 \% \text { (paid annually) } \\ \text { Current price } & \$ 850 \\ \text { Yield to Maturity } & 12 \% \end{array}$

A) less than 12%. B) more than 12%. C) 12%. D) Cannot be determined. E) None of the options are correct. A) less than 12%. B) more than 12%. C) 12%. D) Cannot be determined. E) None of the options are correct.

What would the yield to maturity be on a four-year zero-coupon bond purchased today? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 5 \% \\ 2 & 5.5 \% \\ 3 & 6.0 \% \\ 4 & 6.5 \% \\ 5 & 7.0 \% \end{array}$

A) 5.75% B) 6.30% C) 5.65% D) 5.25% A) 5.75% B) 6.30% C) 5.65% D) 5.25%

Given the bond described above, if interest were paid semi-annually (rather than annually) and the bond continued to be priced at $917.99, the resulting effective annual yield to maturity would be $\begin{array}{lc} \text { Par Value } & \$ 1,000 \\ \text { Time to Maturity } & 18 \text { Years } \\ \text { Coupon } & 9 \% \text { (paid annually) } \\ \text { Current price } & \$ 917.99 \\ \text { Yield to Maturity } & 12 \% \end{array}$

A) less than 10%. B) more than 10%. C) 10%. D) Cannot be determined. E) None of the options are correct. A) less than 10%. B) more than 10%. C) 10%. D) Cannot be determined. E) None of the options are correct.

What is the yield to maturity of a 2-year bond? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 4.6 \% \\ 2 & 4.9 \% \\ 3 & 5.2 \% \\ 4 & 5.5 \% \\ 5 & 6.8 \% \end{array}$

A) 4.6% B) 4.9% C) 5.2% D) 4.7% E) 5.8% A) 4.6% B) 4.9% C) 5.2% D) 4.7% E) 5.8%

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{lr} & \text { Forward } \\ \text { Year } & \text { Interest Rate } \\ \hline 0 & \text { (today) } 6 \% \\ 1 & 7 \% \\ 2 & 9 \% \\ 3 & 10 \% \end{array}$ What is the yield to maturity of a 3-year zero-coupon bond?

A) 7.03% B) 9.00% C) 6.99% D) 7.49% E) None of the options are correct. A) 7.03% B) 9.00% C) 6.99% D) 7.49% E) None of the options are correct.

What is the yield to maturity of a 3-year bond? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 4.6 \% \\ 2 & 4.9 \% \\ 3 & 5.2 \% \\ 4 & 5.5 \% \\ 5 & 6.8 \% \end{array}$

A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8% A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8%

What should the purchase price of a 2-year zero-coupon bond be if it is purchased today and has face value of $1,000? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 4.6 \% \\ 2 & 4.9 \% \\ 3 & 5.2 \% \\ 4 & 5.5 \% \\ 5 & 6.8 \% \end{array}$

A) $966.87 B) $911.37 C) $950.21 D) $956.02 E) $945.51 A) $966.87 B) $911.37 C) $950.21 D) $956.02 E) $945.51

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{lr} & \text { Forward } \\ \text { Year } & \text { Interest Rate } \\ \hline 0 & \text { (today) } 6 \% \\ 1 & 7 \% \\ 2 & 9 \% \\ 3 & 10 \% \end{array}$ What is the price of a 3-year zero-coupon bond with a par value of $1,000?

A) $863.83 B) $816.58 C) $772.18 D) $765.55 E) None of the options are correct. A) $863.83 B) $816.58 C) $772.18 D) $765.55 E) None of the options are correct.

What should the purchase price of a 5-year zero-coupon bond be if it is purchased today and has face value of $1,000? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 4.6 \% \\ 2 & 4.9 \% \\ 3 & 5.2 \% \\ 4 & 5.5 \% \\ 5 & 6.8 \% \end{array}$

A) $776.14 B) $721.15 C) $779.54 D) $756.02 E) $766.32 A) $776.14 B) $721.15 C) $779.54 D) $756.02 E) $766.32

What is the yield to maturity of a 5-year bond? $\begin{array}{lr} &\text { 1-Year } \\ &\text { Forward }\\ \text { Year } & \text { Rate } \\ 1 & 4.6 \% \\ 2 & 4.9 \% \\ 3 & 5.2 \% \\ 4 & 5.5 \% \\ 5 & 6.8 \% \end{array}$

A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8% A) 4.6% B) 4.9% C) 5.2% D) 5.5% E) 5.8%

Exam 15: The Term Structure of Interest Rates

Given the bond described above, if interest were paid semi-annually (rather than annually), and the bond continued to be priced at $850, the resulting effective annual yield to maturity would be Par Value \ 1,000 Time to Maturity 20 Years Coupon 10\% (paid annually) Current price \ 850 Yield to Maturity 12\%

(Multiple Choice)

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Question 21

Given the yield on a 3-year zero-coupon bond is 7.2% and forward rates of 6.1% in year 1 and 6.9% in year 2, what must be the forward rate in year 3?

(Multiple Choice)

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Question 22

What is the yield to maturity on a 3-year zero-coupon bond? The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. Maturity (Years) Price 1 \ 925.15 2 862.57 3 788.66 4 711.00

(Multiple Choice)

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Question 23

What would the yield to maturity be on a four-year zero-coupon bond purchased today? 1-Year Forward Year Rate 1 5\% 2 5.5\% 3 6.0\% 4 6.5\% 5 7.0\%

(Multiple Choice)

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Question 24

An upward-sloping yield curve

(Multiple Choice)

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Question 25

An inverted yield curve implies that

(Multiple Choice)

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Question 26

Given the bond described above, if interest were paid semi-annually (rather than annually) and the bond continued to be priced at $917.99, the resulting effective annual yield to maturity would be Par Value \ 1,000 Time to Maturity 18 Years Coupon 9\% (paid annually) Current price \ 917.99 Yield to Maturity 12\%

(Multiple Choice)

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Question 27

Forward rates future short rates because .

(Multiple Choice)

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Question 28

An inverted yield curve is one

(Multiple Choice)

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Question 29

What is the yield to maturity of a 2-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

(Multiple Choice)

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Question 30

The pure yield curve can be estimated

(Multiple Choice)

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Question 31

If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows), you could

(Multiple Choice)

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Question 32

Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 6\% 1 7\% 2 9\% 3 10\% What is the yield to maturity of a 3-year zero-coupon bond?

(Multiple Choice)

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Question 33

What is the yield to maturity of a 3-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

(Multiple Choice)

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Question 34

The yield curve is a component of

(Multiple Choice)

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Question 35

What should the purchase price of a 2-year zero-coupon bond be if it is purchased today and has face value of $1,000? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

(Multiple Choice)

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Question 36

Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 6\% 1 7\% 2 9\% 3 10\% What is the price of a 3-year zero-coupon bond with a par value of $1,000?

(Multiple Choice)

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Question 37

What should the purchase price of a 5-year zero-coupon bond be if it is purchased today and has face value of $1,000? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

(Multiple Choice)

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Question 38

What is the yield to maturity of a 3-year zero-coupon bond? Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 3\% 1 4\% 2 5\% 3 6\%

(Multiple Choice)

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Question 39

What is the yield to maturity of a 5-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

(Multiple Choice)

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Question 40

Exam 15: The Term Structure of Interest Rates

Given the yield on a 3-year zero-coupon bond is 7.2% and forward rates of 6.1% in year 1 and 6.9% in year 2, what must be the forward rate in year 3?

What is the yield to maturity on a 3-year zero-coupon bond? The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. Maturity (Years) Price 1 \ 925.15 2 862.57 3 788.66 4 711.00

What would the yield to maturity be on a four-year zero-coupon bond purchased today? 1-Year Forward Year Rate 1 5\% 2 5.5\% 3 6.0\% 4 6.5\% 5 7.0\%

An upward-sloping yield curve

An inverted yield curve implies that

Forward rates ____________ future short rates because ____________.

An inverted yield curve is one

What is the yield to maturity of a 2-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

The pure yield curve can be estimated

If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows), you could

Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 6\% 1 7\% 2 9\% 3 10\% What is the yield to maturity of a 3-year zero-coupon bond?

What is the yield to maturity of a 3-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

The yield curve is a component of

What should the purchase price of a 2-year zero-coupon bond be if it is purchased today and has face value of $1,000? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 6\% 1 7\% 2 9\% 3 10\% What is the price of a 3-year zero-coupon bond with a par value of $1,000?

What should the purchase price of a 5-year zero-coupon bond be if it is purchased today and has face value of $1,000? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

What is the yield to maturity of a 3-year zero-coupon bond? Suppose that all investors expect that interest rates for the 4 years will be as follows: Forward Year Interest Rate 0 (today) 3\% 1 4\% 2 5\% 3 6\%

What is the yield to maturity of a 5-year bond? 1-Year Forward Year Rate 1 4.6\% 2 4.9\% 3 5.2\% 4 5.5\% 5 6.8\%

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Forward rates future short rates because .