1. Suppose that someone wanted to buy a $1,000 face value T-bond that matures in November 2001. How much would it have cost on Black Monday?

Answer: $____________ per $1,000 face value

2. How much would the same bond have cost on the previous day, which was Friday, Oct. 16, 1987?

Answer: $____________ per $1,000 face value

3. For the November 2001 T-bond, did its yield rise or fall on Black Monday?

Answer: Its yield Rose / Fell (Circle One)

4. What happened to the price and yield for the November 2001 T-bond between when it was first

auctioned off and Black Monday?

Answer: The price has Risen/Fallen (circle one) by about _______% and

the yield has Risen/Fallen (circle one) by about _____ basis points.

5. How much is the semi-annual coupon payment for a $1,000 face value T-bond that matures in

November 2001?

Answer: The semi-annual coupon payment is $_____________ per $1,000 face value.

6. Suppose that the inflation rate was 4% on Black Monday. Whats the nominal yield and the real yield for the November 2001 T-bond on Black Monday?

Answer: The nominal yield is ________% and the real yield is ________%

7. Draw a yield curve for Black Monday. Then, with a dotted line, draw a yield curve for the previous day, which was Friday, Oct. 16, 1987. Be sure to label the axes.

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