1. The is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price. A) yield to maturity B) current yield C) rate of return D) yield rate 2. Which of the following are TRUE concerning the distinction between interest rates and returns? A) The rate of return on a bond will not necessarily equal the interest rate on that bond. B) The rate of return on a bond can be expressed as the difference between the current yield and the rate of capital gains. C) The rate of return on a bond will be greater than the interest rate when the price of the bond falls during the holding period. D) The rate of return on a bond can be expressed as the sum of the discount yield and the rate of capital gains. 3. A $1,000-face-value bond has a 5% coupon rate, its current price is $1,000, and its price is expected to decrease to $900 next year. What's the expected rate of return of this bond? A) 5 percent B) 10 percent C) -5 percent D) -10 percent 4. Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly rate of return on the bond you are holding? A) 5 percent B) 10 percent C) 15 percent D) 20 percent 5. I purchase a 10 percent coupon bond. Based on my purchase price, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset A) 10 percent B) 8 percent. C) 12 percent. D) there is not enough information to determine the return. 6. If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding? A) a bond with one year to maturity B) a bond with five years to maturity Ca bond with ten years to maturity