17-19

16)The Fisher effect is defined as the relationship between which of the following variables? A) Default risk premium, inflation risk premium, and real rates B) Nominal rates, real rates, and interest rate risk premium C) Interest rate risk premium, real rates, and default risk premium D) Real rates, inflation rates, and nominal rates E) Real rates, interest rate risk premium, and nominal rates 17) Which bond would you generally expect to have the highest yield? A) Risk-free Treasury bond B) Nontaxable, highly liquid bond C) Long-term, high-quality, tax-free bond D) Short-term, inflation-adjusted bond E) Long-term, taxable junk bond 18) The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity? A) 6.97 percent B) 6.92 percent C) 6.88 percent D) 7.22 percent E) 7.43 percent 19) You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is S1,021.61. The bond matures in 11 years. What is the yield to maturity? A) 6.12 percent B) 6.22 percent C) 6.46 percent D) 6.71 percent E) 5.80 percent