Q1: Choose the correct answer with explanations: ) An economy that best utilizes its resources is most likely described as: A. Allocatiepally efficient B. Informationally efficient. c. Operationally efficient (ii) Two bonds, a U.S. Treasury bond has a yield to maturity of 5 per cent, while a bond issued by an industrial corporation, has a yield to maturity of 7 per cent. The two bonds are otherwise identical i.e. they have the same maturity and are option-free. The most likely explanation for the difference in yields of the two bonds is: A. Default risk premium B. Inflation premium C. Real risk-free interest rate. (ii) Liquidity premium can be best described as compensation to investors for. A inability to sell a security at its fair market value. B. locking funds for longer durations. C. a risk that investment's value may change over time. (iv) Camilla wishes to compute the effective annual rate of a financial instrument with a stated annual rate of 22% and compounded every quarter? Which of the following is most likely to be closest to the effective annual rate? A 23% B. 2496 C. 25% (v) The nominal annual interest rate on a mortgage is 7%. The effective annual rate on that mortgage is 7.18%. The frequency of compounding is most likely: A semi-annual. B. quarterly c. monthly