1.A bond has a face value of $1,045, a coupon rate of 7% and 11 years until maturity. If similar bonds have an average yield of 6%, what price would you expect to pay for this bond?

2.Bond investors will experience capital gains when

A.		more bonds are called than issued over a given period of time.
B.		market interest rates are high and falling.
C.		market interest rates are high and rising.
D.		the required rate of return exceeds the risk-free rate of return.

3.Unsecured bonds are backed by

A.		the issuer's good name.
B.		physical assets like real estate.
C.		financial assets held in trust by a third party.
D.		earnings from the project the debentures were issued to finance.

4.Bond investors will experience capital gains when

A.		more bonds are called than issued over a given period of time.
B.		market interest rates are high and falling.
C.		market interest rates are high and rising.
D.		the required rate of return exceeds the risk-free rate of return.

5

5.Mortgage Backed Securities are relatively safe investments EXCEPT

	A.	when inflation is high.
	B.	when home prices decline.
	C.	when interest rates rise.
	D.	when mortgage holders refinance frequently.