Determine if the following statements are true or false. Explain why they are true or false. In some of the questions, information will be provided before True or False. This information should be treated as true and you should evaluate the statement after the True or False.

1)Mikels Annuities issues a 30-year annuity that pays $100 per year and also a 15-year zero coupon bond with a $1000 face value. The term structure of interest rates is at 5%. True or False. The annuity is less sensitive to interest rates than the zero-coupon bond.

2)True or False. A capped floating rate bond is less sensitive to interest rates than a comparable uncapped floating rate bond.

3)True or False. Since corporate bonds have default risk, the expected returns for corporate bonds should be higher than the expected returns for Treasuries.

4)In a reverse repo, we borrow bonds from a repo dealer. True or False. Because we are borrowing bonds from the repo dealer, when we return the bond to the repo dealer, we also need to pay interest to the repo dealer to compensate the repo dealer.

5)From 1962 to 2018, the standard deviation of changes in the 1-year Treasury yield was 1.78% and the standard deviation of changes in the 10-year Treasury yield was 1.19%. True or False. Since the changes in the 1-year yield had a higher standard deviation than the changes in the 10-year yield, changes in the 1-year price also had a higher standard deviation than changes in the 10-year price.

6)All interest rates below are annual and annually compounded. True or False. In an effcient market, the following set of zero coupon Treasury yields cannot exist. T (years) yield 8 5% 9 4.5% 10 4.25%