B) a longer remaining maturity. C) a shorter original maturity. D) a shorter remaining maturity E) none of the above 5. Answer: What condition must exist if a bond's coupon rate is to equal both the bond's current yield and its yield to maturity? Assume the market rate of interest for this bond is positive. A) The bond must be a zero coupon bond and mature in exactly one year B) The market price must exceed the par value by the value of one year's interest C) The bond must be priced at par. D) There is no condition under which this can occur 6. Answer: On which one of the following dates is the principal amount of a semiannual coupon bond repaid? A) A portion of the principal is repaid on each coupon date. B) The entire bond is repaid on the issue date. C) Half of the principal is repaid evenly over each coupon period with the remainder paid on the issue date. D) The entire bond is repaid on the maturity date. E) Half of the principal is repaid evenly over each coupon period with the remainder paid the maturity date. 7. Answer: The rate of returm an investor eams on a bond prior to adjusting for inflation is called the: A) nominal rate. B) real rate. C) coupon rate. D) Yield to maturity (YTM) E) none of the above. 8. Answer: The term structure of interest rates represents the relationship between which of the follow- ing? A) Nominal rates on risk-free and risky bonds B) Real rates on risk-free and risky bonds C) Nominal and real rates on default-free, pure discount bonds D) Market and coupon rates on default-free, pure discount bonds E) Nominal rates on default-free, pure discount bonds and time to maturity 9. Answer: ( The inflation premium: A) increases the real return. B) is inversely related to the time to maturity