True or False:

1. If the repo dealer is properly hedged between t-bills they have promised to buy and those promised to sell, the repo dealer will not be exposed to interest rate risk.
2. Assuming equal risk, if municipal bonds paid interest that was equivalent to a taxable corporate bond, then investors would rush to buy them, driving the price up and the yield down. Conceptually, buying would persist in driving prices up and yields down until the muni yield was equivalent to the after-tax corporate yield.
3. In the three-stock index problem, there is a large difference in the returns for the price-weighted and value-weighted indexes. This difference is the result of the high market cap of Stock A and the high price of Stock C.