1. Which one of the following statements is false?

a) If the Treasury sold t-bonds more than expected in an auction, bond prices are expected to fall.

b) Settlement of t-bills by Treasury leads to an expectation that t-bond prices would fall.

c) Direct t-bill sale of Central Bank will lead to an expectation of fall in t-bond prices.

d) Foreign exchange sales of Central Bank will lead to an expectation of fall in t-bond prices.

e) Other:

2. Suppose that, a zero-coupon bond with a maturity of 20 years and with a par value of 1.000 $ is sold for an annual market yield of 10%. What would be the duration of the bond?

a) 17

b) 18

c) 19

d) 20

e) Other: