Question 3

An upward sloping yield curve suggests that

a.

Interest rates in the future would first increase and then go down.

b.

The interest rates in the future are likely to go up.

c.

The interest rates in the future are likely to remain the same

d.

The interest rates in the future are likely to go down.

Question 7

Everything else the same, if the yield to maturity decreased 1 percentage point, which of the following bonds would have the smallest percentage increase in value?

a.

A 3-year bond with 11% coupon.

b.

A 25-year 11% coupon bond.

c.

A 25-year 7.5% coupon bond.

d.

A 3-year zero coupon bond.

e.

A 25-year zero-coupon bond.