1. After three years, a deposit of $1,000 that compounds annually at an interest rate of 20% returns A. $1,000. B. $1,200. C. $1,440. D. $1,728.

2. A one-year discount bond has a face value of $1,500 and a price of $1,200. What is the yield to maturity? A. 15% B. 20% C. 25% D. 30%

3. A two-year discount bond with face value $1,000 and price $950 has a yield of A. 4.9%. B. 5%. C. 5.3% D. none of the above.

4. A two-year coupon bond has a face value of $1,000, a coupon rate of 5% and a yield to maturity of 2%. What is the price of the bond? A. $944.21. B. $1,000. C. $1,058.25. D. $1,078.43.

5. Household wealth affects the equilibrium yield on bonds due to its impact on A. the demand for bonds. B. the supply of bonds. C. the supply and demand for bonds. D. Inflation has no effect on bond yields.

6. An increase in household wealth causes the _____ bonds to shift and for equilibrium interest rates to A. demand for, rise. B. demand for, fall. C. supply of, rise. D. supply of, fall.

7. A decrease in household wealth increases the risk premium of corporate bonds.

A. True B. False

8. Default risk is measured by the A. term premium. B. risk premium. C. credit premium. D. none of the above.