1.An investor buys a 6% annual payment bond with 3 years to maturity. The bond has a yield-to-maturity of 7%. The bond's modified duration is closest to:

A. 2.73

B. 2.83

C. 2.65

2. All else equal, if a AA rated corporate bond undergoes a downgrade in credit rating you would expect that the bond yield for this company would most likely:

A. Decrease

B. Decrease

C. Stay the same

3. Which of the following credit risk model performs best in measuring a debt issues default probability?

A. Reduced form model

B. Credit rating

C. Structural model