1.

Which of the following is true of U.S. Treasury Bills?

	A.	They have a relatively large probability of default.
	B.	They have infinite life, also described as a perpetuity.
	C.	They pay coupons at the end of each quarter (every 3 months) and return the face value at maturity.
	D.	They have a time to maturity of less than or equal to 1 year.
	E.	They pay coupons that increase at a constant percentage rate throughout their life.

2.

You are trying to price two bonds that have the same time to maturity of 3 years and the same par value of $1,000 but different coupon rates and different yields to maturity. Bond A has a coupon rate of 7% and a yield to maturity of 7%. Bond B has a coupon rate of 5% and a yield to maturity of 6%. What is the absolute value of the difference between the price of Bond A and Bond B?

	A.	$15.66
	B.	$26.73
	C.	$3.33
	D.	$0
	E.	$9.16