1

A bond with a 8 % coupon rate that pays interest semi-annually and is priced at par will have a market price of _____ and coupon payments in the amount of _____ each.

		$1,080; $40
		$1,000; $40
		$1,080; $80
		$1,000; $80
		$1,008; $80

2

A bond has a 5% coupon rate, a 6% yield to maturity, and $1000 face value. The bond pays coupon payments annually, and it matures in 1 year. What is the current bond price?

		$990.57
		$1009.52
		$943.40
		$1,000.00
		$1005.64

3

You are comparing stock A to stock B. Given the following information, which one of these two stocks should you prefer and why? Assume that all of your money must be invested in just one type of stocks: you invest everything in either A or B.

	Rate of Return if State Occurs
State of the Economy	Probability	Stock A	Stock B
Boom	0.5	20%	18%
Recession	0.5	10%	14%

		Stock A; because it has an expected return of 7 % and appears to be riskier
		Stock A; because it has a higher expected return and appears to be less risky than stock B
		Stock B; because it has a higher expected return and appears to be less risky than stock A
		Stock A; because it has a slightly lower expected return but appears to be significantly less risky than stock B
		Stock B; because it has a higher expected return and appears to be just slightly riskier than stock A