1.If market interest rates fall to 5%, what would be true of a bond that pays coupons of 7% semi-annually? A)Bond will sell at a premium B)Bond will sell at a discount C)Bond will sell at par D)Coupon rate will be increased to current interest rate E)Principal to be repaid will increase

2.Which of the following is true about bonds? A)The issuer retains interest rate risk on floating rate bonds B)The bond rating being changed from BBB+ to A would result in a higher required yield C)The primary advantage to municipal bonds is lower reinvestment risk D)Treasury securities are priced once per month while other bond prices fluctuate daily E)Callable bonds require higher yields than non-callable bonds because of higher default risk

3.Value a 5-yr, non-callable bond that pays coupons of 2% assuming market interest rates are 4%. A)$866 B)$910 C)$953 D)$1,000 E)$757

4.Given the following information, calculate Fund ABCs alpha: T-Bill Return: 4% S&P 500 Return: 10% Beta: 1.1 Beginning Fund Value: $110 Ending Fund Value: $125 A)-5% B)5% C)-3% D)4% E)3%

5.You own a 20 year bond and a 30 year bond, both of which are non-callable bond and pay a coupon of 7%. What is true about the change in value of your bonds if interest rate fall from 6% to 5%? A)The value of the 30-yr bond will decrease by $29.80 more than the 20-yr bond B)The value of the 30-yr bond will increase by $35.25 more than the 20-yr bond C)The value of the 30-yr bond will decrease by $35.25 more than the 20-yr bond D)The value of the 30-yr bond will increase by $29.80 more than the 20-yr bond E)The value of the 30-yr bond will increase by $89.20 more than the 20-yr bond

6. Assume that a $1,000, 15 year, 8% bond is callable after 10 years at 104% of par value and the discount rate in todays market is 9%. Interest is paid semi-annually. Using the price-to-worst method, what is the value of this bond?A)$986 B)$952 C)$946 D)$919 E)$1,086