True or false:

1. If interest rates fall by 1%, a 10-year, 3% coupon bond will increase in percentage of price less than an otherwise equivalent zero-coupon bond.

2. The term structure of interest rates defines the relation between bond maturity and bond yield to maturity.

3. Nominal interest rates tend to increase when the economy expands.

4. A pension fund would probably prefer a municipal security with a yield of 2.5% to an equivalent corporate bond with a yield of 3%.