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1) Interest rate risk is greater for ____ while reinvest rate risk is more severe for _____. Choose the best answer! A) long-term zero-coupon bonds;

1) Interest rate risk is greater for ____ while reinvest rate risk is more severe for _____. Choose the best answer!

A) long-term zero-coupon bonds; short-term bonds

B) long-term coupon bonds; short-term bonds

C) Short-term bonds; long-term bonds

D) Short-term zero-coupon bonds; long-term bonds

E) Interest rate risk is equally spread across all bond maturities

2) A zero-coupon bond with 5 years to maturity is currently selling at 88.5 PERCENT of par value. Calculate the yield to maturity on this bond.

A) 5%

B) 2.47%

C) 1.22%

D) None of the above is correct

3) If interest on a bank loan is determined by multiplying the interest rate by the original principal, ignoring the effects of compounding, the loan is most likely a:

A) simple interest loan

B) discount interest loan

C) add-on interest loan

D) an adjustable rate loan

E) mortgage loan

4). The realized compound yield on a coupon-paying bond would equal the bond's yield to maturity if

the coupon rate is equal to yield to maturity at the time a bond is issued

the bond is issued at par

the bond is issued at par and its coupons are reinvested at the coupon rate

None of the above

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