As a bond fund manager, you are considering 10-year corporate bonds issued by Mellon Bank (MB). Each MB bond has a $1,000 par value with 8% annual coupon rate. The coupons are paid semi-annually. The estimated rate of return on MB bond is 10%. What is the price of the bond?

	A.	$946.32
	B.	$875.38
	C.	$1,010.29
	D.	$831.31

The WSJ reports that the rates on 3- and 4-year Treasuries are 4.64% and 4.78%, respectively. You estimate that the liquidity premium on the 4-year Treasuries is 0.37%. What is the expected 1-year Treasury spot rate in year 4?

	A.	4.54%
	B.	4.83%
	C.	4.71%
	D.	4.60%

The WSJ reports that the rates on 4- and 5-year Treasuries are 4.36% and 4.25%, respectively. You estimate that the 1-year rate expected in year 5, E(r5), is 3.57%. Based on the liquidity preference theory, what should the liquidity premium on the 5-year Treasuries be?

	A.	0.116%
	B.	0.088%
	C.	0.135%
	D.	0.241%

What will happen to a bond's price when its YTM increases? If its YTM continues to increase, what will eventually happen to the magnitude of the bond price change?

	A.	Its price will increase, and the magnitude of increase will get smaller.
	B.	Its price will decrease, and the magnitude of decrease will get larger.
	C.	Its price will decrease, and the magnitude of decrease will get smaller.
	D.	Its price will increase, and the magnitude of increase will get larger.