1. What is the yield to maturity on a simple loan of $200 taken out for one year if the borrower has to pay back $210 to the lender?

a. 10%.

b. .05

c. .01

d. 5%

2. The coupon rate on a bond is

a. The current yield on the bond.

b. The face value of the bond.

c. The bond's interest rate.

d. The capital gain on the bond.

3. What is the return on a $1000 face- value coupon bond with a coupon rate of 5% that is bought for $1000, held for one year and sold for $1300?

a. 35%

b. $10

c. 10%

d 100%

4. The Fisher equation says that

a. The real interest rate is the nominal interest rate plus the actual inflation rate.

b. The nominal interest rate is the real interest rate plus the expected inflation rate.

c. The nominal interest rate is the real interest plus the actual inflation rate.

d. The real interest is the nominal interest rate minus the actual inflation rate.

5. According to the Fisher Equation if the nominal interest rate is 6% and the expected inflation rate is 9%, the real interest rate is?

a. 30%

b. 6%

c. 3%

d. - 3%

PICK A ANSWER FOR EACH MULTIPLE CHOICE