1. To derive the 5-year forward rate three years from now, the information required are:

A. 2-year and 3-year spot rates.

B. 3-year and 5-year spot rates.

C. 3-year and 8-year spot rates.

2. For a mortgage pass-through security, which of the following risks most likely increases as interest rates decline?

A. Credit.

B. Extension.

C. Contraction.

3. Suppose an annual coupon payment bond has a maturity of 10 years. If an investor's total return is $210.59 on a bond that is priced at $98.42, what is the realized rate of return?

A. 1.3%

B. 7.9%

C. 114%