1.

You predict that interest rates are about to fall. Which bond will give you the highest capital gain? Assume all bonds are trading at the same price.

Group of answer choices

High coupon, short maturity

Low coupon, long maturity

Zero coupon, long maturity

High coupon, long maturity

Zero coupon, short maturity

2.

Bond A, B, and C share the same maturity date, coupon rate, and face value. Assume they all have similar durations.

Bond A is a straight bond; B is callable on date X in the future; C is putable on date X in the future.

Which bond would most likely protect investors against a significant increase in interest rate?

Group of answer choices

A

B

C