20. A one year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year? a. 13.50% b. 4.52% c. 7.38% d. 9.02%

21. A two year bond offers a yield of 6% and a three year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond in two years? a. 5.95% b. 10.56% c. 3.06% d. 12.49%

22. The yield on a one year bond is 6% today and is expected to be 8.5% next year. Based on the expectations theory, what is the yield of a two year bond today? a. 15.01% b. 12.68% c. 5.67% d. 7.24%

23. You are looking up bond prices in the newspaper and you find the following quote for a $1,000 face value treasury bond: 103:26. What is the price of this bond? a. $103.26 b. $1,038.13 c. $1,032.60 d. $1,000

24. You have the choice between investing in a corporate bond with a yield of 8% or a municipal bond. If your marginal tax rate is 28%, what should be the yield on the municipal bond in order to be competitive? a. 8.00% b. 5.76% c. 11.11% d. 13.69%

25. You have the choice between investing in a corporate bond or a municipal bond with a yield of 8%. If your marginal tax rate is 28%, what should be the yield on the corporate bond in order to be competitive? a. 8.00% b. 5.76% c. 13.64% d. 11.11%

26. McLaughlin Enterprises has an outstanding $1,000 par value bond with a 11% coupon that pays at the end of each year. The bond matures in nine years. Bonds of similar risk have a required return of 10%. What is the market value of the McLaughlin bond? a. $890.00 b. $1,053.35 c. $1,000.00 d. $1,057.59

27. Winburn Sports & Entertainment has an outstanding $1,000 par value bond with a 11% coupon that pays semiannually at the end of each period. The bond matures in nine years. Bonds of similar risk have a required return of 10%. What is the market value of the Winburn bond? a. $1,035.54 b. $1,057.59 c. $1,058.45 d. $1,073.05 28. A 10-year Treasury bond with par value of $1,000 has a 6% coupon rate and pays interest every six months. The bond is three years old and has just made its sixth payment. The market now only requires a 5% return on the bond. What is the expected price of the bond? a. $802.03 b. $1,058.45 c. $1,077.95 d. $1,350.73 29Alexis Media issued five-year bonds one year ago with a 7.5% coupon that pays semi-annually (the bonds just paid the second coupon payment). Alexis announced a revised advertising revenue forecast that is quite bleak compared with the prevailing forecast at the time of the bond issuance. Investors now require a 9% return on Alexis bonds. What is the percent change in price of the bonds associated with the change in business conditions? a. 4.95% decrease b. 8.30% decrease c. 29.06% decrease d. 19.79% increase e. Cant determine with the information given 30 A $1,000 par value bond that makes annual interest payments of $50 and matures in four years sells for $980. What is the yield to maturity of the bond? a. 5.57% b. 2.47% c. 4.54% d. 2.04%