1. Which of the following measures how long it takes to recover a projects initial costs?

A. payback period

B. net present value

C. internal rate of return

D. profitability index

2. A discount bond is selling at a price _______ the par value.

A. above

B. below

C. at

D. either above or below

3. The measure for the curvature in the relationship between bond prices and bond yields is called:

A. convexity

B. duration

C. interest rate risk

D. yield to maturity

4. You want to buy T-bills. Do you look at BID or ASK price?

A. BID

B. ASK

C. Either will do

D. the average of BID and ASK