1. Which of the following conditions will increase the interest rate risk on a bond?

1. shorter time to maturity
2. longer time to maturity
3. lower coupon rate
4. higher coupon rate

Select one:

a. I and III

b. I and IV

c. II and III

d. II and IV

e. none of the above

2.

The principal amount repaid at the maturity of a bond is called its

Select one:

a. real interest rate.

b. face value.

c. credit risk premium

d. coupon repayment.

e. maturity value.

3.

XYZ Co. is planning to issue stripped bonds with a face value of $100 and maturity of 10 years. What is the price of each stripped bond if the yield to maturity on similar bonds is 5.5% compounded semi-annually?

Select one:

a. $58.13

b. $58.54

c. $76.24

d. $94.72

e. $100.00