1.) A $1,000 face value bond, with one year to maturity that sells for $950 and has a $40 annual coupon has a:

A. current yield and yield to maturity of 4.00%.

B. yield to maturity that equals the current yield.

C. coupon rate of 4.00% and a current yield that is below this.

D. current yield of 4.21%.

2.) When expected inflation increases, for any given nominal interest rate the:

A. bond demand curve shifts right.

B. bond supply curve shifts right.

C. price of bonds increases.

D. yield on bonds will increase.