4) The liquidity premium on a US Treasury debt security is normally considered to be A) 4 percent B) 3 percent C) 2 percent D) 1 percent E) 0 percent

5) Which of the following statements about term structure is(are) most correct? A) Term structure is the relationship between interest rates and debt maturities. B) Term structure can be expressed either in tabular form or in graphical form. C) A term structure graph is called the yield curve. D) The yield curve can have a variety of shapes, but the most common is upward sloping. E) All of the above statements are correct.

6) What is the value of a 10 percent annual coupon, $1,000 par value bond with 20 years to maturity if the required rate of return on the bond is 12 percent? A) $1,236.48 B) $925.42 C) $850.61 D) $798.79 E) $737.55

7) Which of the following statements is most correct? A)Compared to fixed interest rates, variable rates are riskier for the borrower but less risky for the lender. B) Compared to fixed interest rates, variable rates are riskier for the lender but less risky for the borrower. C) Variable rates are equally risky for the lender and the borrower. D) Variable rate debt never should be used by healthcare organizations because it is too risky.E) Fixed interest rates are more prevalent when long-term borrowing rates are high.

8)Which of the following statements is most correct? A) The interest rate on a new issue of callable bonds is likely to exceed that on a similar new issue of noncallable bonds. B) The interest rate on a new issue of noncallable bonds is likely to exceed that on a similar new issue of callable bonds. C) Noncallable bonds are riskier to the investor, while callable bonds are riskier to the issuer. D) There is no difference in risk to the investor between similar callable and noncallable bonds. E) The interest rate on a new issue of callable bonds is likely to be equal to that on a similar new issue of noncallable bonds.

9) Assume that an outstanding seven-year bond has $1,000 par value, a coupon rate of 10 percent, and five years remaining to maturity. If the required rate of return on similar bonds of equal risk is 5 percent, the bond will sell at which of the following? A) A premium B) A discount C) At par value D) At $500 ($100 annual interest payments x 5 years to maturity) E) The bond cannot be sold again because it is already outstanding.

10 The price of an outstanding bond is determined by which of the following? A) The bond's par value B) The bond's coupon rate C) The required rate of return on similar bonds D) The time to maturity E) All of the above