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What is meant by "Yield to Maturity"? 1) The coupon interest rate paid each year, divided by the face value of the bond. 2) The periodic interest rate that equates the current price with the expected future cash flows, up to the time of the first call. 3) The coupon interest rate paid annually, divided by the current price of the bond. 4) The periodic interest rate that equates the current price with the expected future cash flows. What happens to the price of bonds, if interest rates go down? 1) The price of bonds stays the same. 2) The price of bonds goes up. 3) The price of bonds goes down. 4) The relationship between interest rates and bond prices cannot be determined. An inverted yield curve generally indicates: 1) the economy is accelerating. 2) economic activity is slowing down. 3) rising inflation. 4) a pending recession