11) For each of the below, indicate True or False. No explanation is required.

1. a) Given: At t = 0 you bought a 3-year, 9% coupon bond with a 7% YTM. You held

   the position until t = 3. Each coupon that was received prior to t = 3 was reinvested and rolled over at a 7% interest rate. Statement: The realized compound yield on the investment was 7%.

2. b) Given: At t = 0 you bought a 4-year zero coupon bond with a 9% YTM. Two years later you sold the bond when it was trading at a 12% YTM. Statement: The realized compound yield on your two-year investment was somewhere between 9% and 12%.

c) Given: At t = 0 a 10-year zero coupon bond had an 8% YTM. You bought the bond at t = 2 when it had 8 years left to maturity and was trading at a 7% YTM. You sold the bond 3 years later when its YTM was greater than 7%. Statement: Your realized compound yield from t = 2 to t = 5 was less than 7%.

4. d) Given: From t = 3 to t = 4 the price of a risk free bond increased, and its YTM also increased. Statement: The coupon rate on this bond must be less than the YTM. (Hint: think of the pull-to-par graph and think of whether the statement would be possible for a bond with a coupon rate greater or equal to its YTM.)

5. e) As a general rule, if one expects interest rates are going to surprise to the upside, it would be wiser to invest in longer term bonds.