1. Which of the following would likely cause a bond to have a lower market value? (Hint: consider the inverse relationship between interest rates and bond prices; determine if each situation given would result in a higher or lower interest rate)

I. The issuers credit rating changed from A to AA.

II. The issuers credit rating changed from AA to A.

III. The YTM of comparable securities rose.

IV. The YTM of comparable securities declined.

V. The bond included a call feature.

1. 1. II and IV.
   2. II, IV and V.
   3. I, III and IV.
   4. II, III and V.
2. Which of the following are correct concerning Certificates of Deposit (CDs)?
   1. Both non-negotiable CDs and Jumbo CDs are subject to capital gains taxation
   2. Only non-negotiable CDs are subject to capital gains taxation.
   3. Only Jumbo CDs are subject to capital gains taxation.
   4. Both non-negotiable CDs and Jumbo CDs are exempt from capital gains taxation.
3. Which of the following statements about Treasury bills is not correct?
   1. T-bills are typically auctioned every week (with 52 week T-bills auctioned every 4 weeks).
   2. T-bills that extend beyond a calendar year are not subject to taxation on the income earned both in the year of issuance and the year of maturity. Rather, income from a T-bill is only taxable in the year of maturity.
   3. T-bills are sold on a pure discount basis only.
   4. T-bills are subject to default risk.
4. Which of the following is not correct concerning bonds?
   1. A bonds YTM is the return an investor earns if they reinvest all coupon payments at the expected return and hold till maturity.
   2. A bonds coupon is usually a fixed percentage of the par value.
   3. A bonds coupon is usually paid semi-annually.
   4. A debenture bond is backed by an asset that the bond holder can repossess if the debt is not pai