$1.$Because a majority of bonds pay a fixed rate of interest, the overall return on owning a bond $\_\_\_\_\_\_\_\_.$

a$.$never changes

b$.$changes in the same direction as inflation

c$.$mirrors changes in the stock market

d$.$changes due to market conditions

$2.$Which of the following cannot issue bonds to the public?

a$.$US government

b$.$Municipalities

c$.$Consumers

d$.$Corporations

$3.$Inflation is a general rise in market prices that affects all goods equally.

a$.$True

b$.$False

$4.$Which of the following correctly orders the financial instruments from the lowest returns to the highest?

a$.$Large company stocks, Baa bonds, $10-$year T$-$bonds, T$-$bills

b$.$T$-$bills, $10-$year T$-$bonds, Baa bonds, large company stocks

c$\mathrm{.}10-$year T$-$bonds, Baa bonds, T$-$bills, large company stocks

d$.$Baa bonds, large company stocks, T$-$bills, $10-$year T$-$bonds

$5.$The US Treasury issues many debt instruments, including bills, notes and bonds. The $10-$year Treasury note is an especially important security in the financial market. Why is the $10-$year T$-$note so important?

a$.$Interest on the note is not federally taxed.

b$.$Interest on the note is adjusted for inflation.

c$.$It is a benchmark rate for many other financial instruments.

d$.$It has no default risk.

$6.$Corporate bonds can be an attractive investment because they offer what to the investor?

a$.$Semiannual interest payments

b$.$Annual dividends

c$.$Protection against inflation

d$.$Default$-$free returns