21. If the yield on 1-year Treasury bill is 6% and the yield on 2-year Treasury note is 7.5%. According to the expectations hypothesis, the expected (future) one-year interest rate one year from now should be A) 7% B) 8% C) 9% D) 10% 22. Consider a 7-year bond with a 9% coupon and a yield to maturity of 12%. If interest rates remain constant, one year from now the price of this bond will be A) higher B) lower C) the same D) cannot be determined 23. We observe that the slope of yield curve is negative. According to the pure expectations hypothesis of the term structure of interest rates, this is an indication that A) short term interest rate is expected to rise in the future B) long term interest rate is expected to rise in the future C) short term interest rate is expected to fall in the future long term interest rate is expected to fall in the future D) A) 24. Other things being equal, which of the following has the longest duration? a 15 year bond with a 10% coupon B) a 20 year bond with a 9% coupon C) a 20 year bond with a 7% coupon D) a 10 year zero coupon bond 25. A bond currently has a price of $1,030. The present yield on the bond is 8.00%. If the yield changes from 8.00% to 8.10%, the price of the bond will go down to $1,020. The duration of this bond is A) -10.5 B) -8.5 C) 9.7 D) 10.5 26. Consider a 5-year $1000 par value bond with 10% coupon paid annually. If the yield to maturity is 7%, what is the duration? A) 10 years B) 5.00 years C) 4.22 years 3.37 years E) 2.61 years