1. Our procedure for adjusting the return rates on credit instruments for differences in their terms is based on the fact that

a. the repayment on a single payment loan can be divided into interest and principal.

b. long-term credit instruments have more interest risk than short-term credit instruments.

c. any long-term loan can be duplicated by a sequence of one-year loans.

d. the price of a bond is the present value of its payments at the market interest rate.