1- Current interest rates are 7 percent. If inflationary expectations increased from the current 5 percent to 3 percent, what would be the new market interest rates?

a. 9 percent

b. 5 percent

c. 10 percent

d. 4 percent

2- Bonds are called speculative grade or junk bond if their Moody's and Standard & Poor's rating is

a. above Baa (BBB).

b. Baa (BBB) and below.

c. B1 (B+) and below.

d. A1 (A+) and below

3- All but one of the following are considered when assigning a bond rating?

a. the variability of earnings

b. the expected cash flow

c. the rating on the prior issue of securities sold

d. the amount of the fixed contractual cash payments