1. The price of a bond is

   (a) equal to the bonds face value (b) equal to the present value of all payments the bond is expected to make

   (c) equal to the future value of all payments the bond is expected to make (d) none of the above

2. Which of the following is true regarding the yield curve?

   (a) It is a plot of interest rates and bonds of different maturities

   (b) The yield curve is always upward sloping (c) An yield curve can only be plotted for US government bonds (d) none of the above

3. If the real interest rate is 5% and inflation is -2% (that is inflation is negative) what is the nominal interest rate?

   (a) 3% (b) 7% (c) 5% (d) 2%