1. How can a bond have a negative rate of return?

A) if the current yield is greater than the coupon rate

B) if the current yield is less than the coupon rate

C) if the rate of capital gains is less than the current yield

D) if the rate of capital loss exceeds the current yield

2. What is the rate of return on a bond with a coupon of $55 that was purchased for $900 and sold

one year later for $950?

A) 5.56%

B) 6.11%

C) 11.67%

D) 12.43%

3. If the expected real interest rate is 1.4% and the nominal interest rate is 2.2%, expected inflation

equals

A) -2%

B) -0.8%

C) 0.8%

D) 2%