Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding?

A) 5 percent

B) 10 percent

C) 15 percent

D) 20 percent

8) I purchase a 10 percent coupon bond. Based on my purchase price, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset is

A) 10 percent.

B) 8 percent.

C) 12 percent.

D) there is not enough information to determine the return.

If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding?

A) a bond with one year to maturity

B) a bond with five years to maturity

C) a bond with ten years to maturity

D) a bond with twenty years to maturity

10) An equal decrease in all bond interest rates

A) increases the price of a five-year bond more than the price of a ten-year bond.

B) increases the price of a ten-year bond more than the price of a five-year bond.

C) decreases the price of a five-year bond more than the price of a ten-year bond.

D) decreases the price of a ten-year bond more than the price of a five-year bond.