1. Which of the following statements is/are true?

I. Options contain a right but not an obligation

II. Options can have negative intrinsic value

III. Options can have negative prices

a. I, II, and III

b. I and II

c, II and III

d. I only

e. II only

2. What is the yield-to-maturity on a 15-year, zero coupon bond selling for $385? The face value is $1000.

a. 4/40%

b. 5.60%

c. 5.97%

d. 6.67%

e. 37.5%

3. What is the market value of a bond that has a coupon rate of 10% (paid semi-annually) if there are 20 years to maturity? Assume the bond has a $1,000 face value and an 8% yield to maturity or required rate of return.

a. $634.86

b. $632.26

c. $1,135.90

d. $1,197.93

e. $1,215.62