1.Which of the following statements are true?

i.7% compounded half-yearly is equivalent to 6.9398% compounded quarterly.

ii.9% compounded quarterly is equivalent to 9.1012% compounded half-yearly.

iii.10% effective annual rate is equivalent to 9.5690% compounded monthly.

A.i and ii

B.i and iii

C.ii and iii

D.All of the above

E.None of the above

2.Which of the following statements are true?

i.8% compounded continuously is equivalent to 8.0805% compounded quarterly.

ii.9% compounded monthly is equivalent to 8.8619% compounded continuously.

A.i only

B.ii only

C.Both of the above

D.None of the above

3.The 1-year to 5-year spot rates are 3%, 3.5%, 4%, 4.5%, and 5%, respectively. Consider a 5-year, 6% annual coupon paying bond? The face value of the bond is $1,000. Which of the following statements are true?

i.The price of the bond is $1,048.45

ii.The yield to maturity is 4.88%

a.i only

b.ii only

c.Both i and ii

d.None of the above

4.If the spot rate curve is increasing, the lower the coupon rate of a bond, the higher is its yield to maturity for a given time to maturity. Is this statement true?

a.True

b.False

5.Bond A and Bond B have the same maturity and belong to the same risk class, but Bond A has a higher YTM than Bond B. Then Bond A is a better investment than Bond B and will be preferred by all investors. Is this statement true?

a.True

b.False