Treasury bills currently pay 2.5% and the inflation rate is 2.0%.The real return earned by investors must be:

a. 4.50%

b. 0.50%

c. -0.50%

d. 3.50%

The pure expectations theory states that:

a. The yield on bonds automatically adjusts to new company information

b. The risk free rate of return depends on inflation and other risk premiums

c. Investors can predict the default rate on bonds and sell them in advance

d. The yield curve shows what interest rates are expected to be in the future

City bank says it pays 2% on a certificate of deposit and Wells Fargo Bank pays 2.33%, with the same maturity date and term period (both FDIC insured).As an investor:

a. Invest in Wells Fargo Bank

b. Invest in City Bank

c. Ask what the inflation premium is

d. Ask about how the rate is compounded

Apple bonds due in 2024 pay 3% interest and US Treasury notes due in 2024 pay 2.5% interest.These differences in yields are most likely caused by:

a. MRP and DRP

b. DRP and LRP

c. MRP and LRP

d. DRP, MRP and LMP

A bond which is lower in rank compared to other bonds of the same company, if the company goes bankrupt, is called:

a. Zero coupon

b. Debenture

c. Call provision

d. Indenture

To finish MBA today cost $45,000. Approximately how much should parents have invested 20 years ago in an account paying 6% compounded annually to cover this amount?

a. $3,923

b. $1,223

c. $144,231

d. $14,032

A good example of an annuity due contract is:

a. Monthly electric bill

b. Quarterly dividend payment

c. Semiannual bond interest payment

d. Monthly rent payment

The US Government issues bonds in 2019.The best description of these bonds is that they are:

a. Senior bonds.

b. Municipal bonds.

c. Treasury bonds.

d. Revenue bonds.