TRUE OR FALSE 1. If the inflation rate were zero, and there were no risk of default, then the interest rate would be equal to zero.

2. Zero coupon bonds are bonds which make no coupon payment at all and are thus priced at a deep discount.

3. A call provision on a bond is a formal legal agreement under which the companys management will notify (i.e. call) the bond investors if the management thinks the company will start having trouble making its debt payments.