1. Suppose it is known at time t that the earnings of an asset will rise at time t+2 and stay at the high level for the foreseeable future. If you bought the asset at time t, then you would receive a ________ if you sold it at time t+2.

A.capital gain

B.capital loss

C.neither a capital gain nor loss

D.could be either a capital gain or loss

2.When the interest rate in the bond market is below its equilibrium value, there is excess _______ in the goods market and excess _______ in the money market.

A. demand, demand

B. demand, supply

C supply, demand

D supply, supply

3.The annualized return on a 5% coupon bond that is initially bought for $1000 and is sold for $900 two years later with no compounding of coupons is:

A.-5%

B.-2.5%**

C. 0%

D. 5%