11. In the ____ strategy, funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity.

a.	matching
b.	laddered
c.	barbell
d.	interest rate
e.	Applied convexity

12, Which of the following bonds has the greatest price risk?

a. A 10-year $100 annuity.

b. A 10-year, $1,000 face value, zero coupon bond.

c. A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.

d. All 10-year bonds have the same price risk since they have the same maturity.

e. A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.

13. Which of the following statements is CORRECT?

a. A bond is likely to be called if its coupon rate is below its YTM.

b. A bond is likely to be called if its market price is below its par value.

c. Even if a bonds YTC exceeds its YTM, an investor with an investment horizon longer than the bonds maturity would be worse off if the bond were called.

d. A bond is likely to be called if its market price is equal to its par value.

e. A bond is likely to be called if it sells at a discount below par.

14. Listed below are some provisions that are often contained in bond indentures. Which of these provisions, viewed alone, would tend to reduce the yield to maturity that investors would otherwise require on a newly issued bond?

1. Fixed assets are used as security for a bond.

2. A given bond is subordinated to other classes of debt.

3. The bond can be converted into the firms common stock.

4. The bond has a sinking fund.

5. The bond has a call provision.

6. The indenture contains covenants that restrict the use of additional debt.

a. 1, 3, 4, 6

b. 1, 4, 6

c. 1, 2, 3, 4, 6

d. 1, 2, 3, 4, 5, 6

e. 1, 3, 4, 5, 6

15. Which of the following is not a factor affecting the market price of a foreign bond held by a U.S. investor?

a.	foreign interest rate movements
b.	credit risk
c.	exchange rate fluctuations
d.	All of the above are factors affecting the market price of a foreign bond.

16. Holding other factors constant, a higher budget deficit leads to ______ interest rates, and higher inflationary expectations lead to _______ interest rates.

a.	higher; lower
b.	higher; higher
c.	lower; higher
d.	lower; lower

17. Erin is, a private investor, who can purchase $1,000 par value bonds for $980. The bonds have a 10 percent coupon rate, pay interest annually, and have 20 years remaining until maturity. Erin's yield to maturity is ____ percent.

a.	9.96
b.	10.00
c.	10.33
d.	10.24
e.	none of the above

18. Devin is, a private investor, purchases $1,000 par value bonds with a 12 percent coupon rate and a 9 percent yield to maturity. Devin will hold the bonds until maturity. Thus, he will earn a return of ____ percent.

a.	12
b.	9
c.	10.5
d.	more information is needed to answer this question

19. Which of the following is not true regarding the call provision?

a.	It typically requires a firm to pay a price above par value when it calls its bonds.
b.	The difference between the market value of the bond and the par value is called the call premium.
c.	A principal use of the call provision is to lower future interest payments.
d.	A principal use of the call provision is to retire bonds as required by a sinking-fund provision.
e.	A call provision is normally viewed as a disadvantage to bondholders.

20. A bond with a $1,000 par value has an 8 percent annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 6 percent. What should be the current price?

a.	$1,069.31
b.	$1,000.00
c.	$9712
d.	$927.66
e.	none of the above