1. In which one of the following cases is the bond selling at a premium?

A. Coupon rate is greater than yield-to-maturity which is greater than current yield.

B. Coupon rate is less than current yield which is less than yield-to-maturity.

C. Coupon rate is greater than current yield which is greater than yield-to-maturity.

D. Coupon rate, current yield and yield-to-maturity are all the same.

2. Using duration and convexity approximation, compute the percentage price change on a 10-year fixed coupon bond, if the interest rate increases by 1%. The modified duration of the bond is 6 years, and convexity is 200 year2.

A. -6%

B. -5%

C. 7%

D. -7%

3. Among the four bonds listed below, which one has the least amount of interest rate risk?

A. 5-year floating rate note with coupon rate = 6 month LIBOR + 20bp, coupons reset every six months

B. 5-year inverse floater with coupon rate = 12% - 6 month LIBOR, coupons reset every six months

C. 5-year zero coupon bond

D. 5-year 6% coupon bond

4. A 5-year 4% Treasury Note has a yield-to-maturity of 3% and a face value of $1,000. Coupons are paid semi-annually and the first coupon will be paid in six months. The price of the T-note is _________.

A. $1,045.80

B. $1,000

C. $955.09

D. $1,046.11

5. A money markets desk holds a floatingrate note with an eight-year maturity. The interest rate is floating at three-month LIBOR rate, reset quarterly. The next reset is in one month. What is the approximate duration of the floating-rate note?

A. 3 months

B. 1 month

C. 2 months

D. 8 years