Which one of the following statements is correct?

A. Treasury bill returns tend to vary in direct relation to inflation rates.

B. The Fisher hypothesis advocates that real interest rates follow inflation rates.

C. All real interest rates will be positive as long as the inflation rate is positive.

D. Short-term interest rates are affected by future inflation expectations

The approximate nominal interest rate is computed as the real rate

A. minus the risk-free rate.

B. plus the risk-free rate.

C. plus the inflation rate.

D. minus the inflation rate.

. Consider a money market instrument with 48 days to maturity and a quoted ask price of 99. Which two of the following statements are correct as they relate to this instrument?

I. The bond equivalent yield is an effective annual rate. II. The bank discount rate is lower than the bond equivalent yield. III. The bank discount rate is an effective annual rate. IV. The bond equivalent yield is lower than the effective annual rate.

A. I and IV only

B. II and IV only

C. I and III only

D. I and II only