1. of the following statements is true for the shape of the yield curve?
   1. In general, the shape of the yield curve is downward because long-term rates are usually lower than short-term rates for the same issuer. Long-term bonds are exposed to lower interest-rate risk. Consequently, bondholders receive a lower yield to hold bonds with longer maturities.
   2. In general, the shape of the yield curve is rising because long-term rates are usually higher than short-term rates for the same issuer. Long-term bonds are exposed to higher interest-rate risk. Consequently, bondholders receive a higher yield to hold bonds with longer maturities.
   3. In general, the shape of the yield curve is downward because long-term rates are usually lower than short-term rates for the same issuer. Long-term bonds are exposed to higher interest-rate risk. Consequently, bondholders receive a higher yield to hold bonds with longer maturities.
   4. In general, the shape of the yield curve is rising because long-term rates are usually higher than short-term rates for the same issuer. Long-term bonds are exposed to lower interest-rate risk. Consequently, bondholders receive a lower yield to hold bonds with longer maturities.

Answer:______

1. Which of the following statements is true for the forward rate?
   1. It is the rate, known in 2-years time, that will make an investor indifferent between investing over two years at the 2-year spot rate and investing over one year at the 1-year spot rate and a second year at the 1-year forward rate.
   2. It is the rate, known in 2-years time, that will make an investor indifferent between investing over two years at the 2-year spot rate and investing over one year at the 1-year forward rate and a second year at the 1-year forward rate.
   3. It is the rate, known today, that will make an investor indifferent between investing over two years at the 2-year spot rate and investing over one year at the 1-year spot rate and a second year at the 1-year forward rate.
   4. It is the rate, known today, that will make an investor indifferent between investing over two years at the 2-year spot rate and investing over one year at the 1-year forward rate and a second year at the 1-year forward rate.

Answer:______

1. Which of the following statements is NOT true for finding the price of a bond?
   1. If we know the yield of the bond, we can get its price.
   2. If we know the bond price, we can get its yield.
   3. If we know the spot rate, we can get the price and the yield of a coupon-paying bond.
   4. If we do not have the bond yield, we cannot use the spot rate to get the bond price.

Answer:______.