1. The following table provides zero coupon bond yields.

Maturity	Bond equivalent yield
6 months	6%
1 year	8%

A 12% coupon bond with coupons paid semiannually matures in one year. The par value of the bond is $1,000. What is the price of this bond? [First identify the cash flows.]

		A. $1,030
		B. $1,032
		C. $1,034
		D. $1,038

2. The following are the prices of zero coupon bonds. Par value is $1,000 in each case.

Maturity	Price
6 months	$998
I year	$995

What is the forward rate (expressed as BEY) for a six month period six months hence? [First compute the semiannual yield for each bond.]

		A. Approximately 4%
		B. Approximately 5%
		C. Approximately 6%
		D. Approximately 7%

3. The term bootstrapping is used to describe:

		A. The computation of spot rates from coupon bond yields
		B. Computing the tax exemp yield from taxable yields
		C. Adjustung the bind u=yields for default risk
		D. Obtaining the long term rates from forward rates,