1. Apple Inc. has just created a smart watch that is activated telepathically. They decided to fund the research for this product by isuing $1000 par value bonds with a 6% coupon rate with coupons paid semi-annually. The bonds have 18.5 years until they mature. Since no competitor is expected to have a product that can match Apple's new smart watch for at least a decade, investors have been buying these bonds like crazy, sending the price up to $1,605.61. You have decided you will only buy some of these bonds if their Yield to Maturity is greater than the rate of inflation, which is currently 2.1%. Given this, will you buy these bonds?

YES or NO ?

2.All else equal, which of the following bonds would have the highest yield?

• A bond rated BB-

• A bond rated B+

• A bond rated B

3. True of false: The riskier a bond, the higher its yield and the higher it's price

4.All else equal, which of the following factors would lead a bond to having a lower yield?

• A lower rating

• A call provision

• A protective covenant

• The bond issuer contemplating starting bankruptcy proceedings

5. True or False: A discount bond is one in which its YTM is lower than its Coupon Rate.

6. A bond has a par value of $1000, a coupon rate of 5%, 24.5 years remaining until maturity, and makes semi annual payments. You can currently buy the bond on the market for $1000. What is the bond's YTM?

• Less than 5%

• 5%

• More than 5%

• There is not enough information provided to determine the YTM.