1.You have a client who is researching bonds for a retirement portfolio. Explain to your client how negative yields-to-maturity in France, Germany, and Japan can be interpreted in a Time Value of Money context.

2.In the middle of a stock valuation presentation your boss interrupts and challenges your use of a growing perpetuity in your model, saying that your growth rate of 2% and a discount rate of 11% can't possibly be true to infinity. Defend your modelling methodology to your boss.

3.The current yield curve is upward sloping across all maturities. Explain to a client what will happen to the price of their bonds if the yield curve does not change over the coming year (i.e. spot rates for all maturities are the same next your as they are today).

4. The interest rate research group at your firm expects that the yield curve will "twist" over the upcoming year, with spot rates for maturities of 10-years and above falling and spot rates for maturities less than 10-years rising. Given the forecast, explain why you would recommend Bond A or Bond B for a long position over the upcoming year: Bond A -discount bond with a duration of 12-years and YTM of 5%; Bond B -coupon rate of 6%, duration of 12-years, and a YTM of 5%.

5.A colleague has identified along-short bond arbitrage trading strategy with two corporate bonds that are identical in every respect except they are issued by two different companies. Explain to your colleague why the strategy is not "risk-free" as we would expect from an arbitrage trading strategy.

6.You are discussing mortgage rates with a client. Bank Z is offering fixed-rate mortgages with a 1-year term that is significantly lower than all the other banks. Explain to your client why you think this means the bank expects mortgage rates to rise a year from now.

7.A friend of yours is considering buying Mortgage-Backed Securities (MBS) because they have a higher yield than government bonds, and your friend expects mortgage rates to be lower in the future (and therefore wants to buy the MBS now, before rates fall). Explain prepayment risk to your friend and why the MBS may be a risky investment.