Question: 1. (True/ False. Explain) Longer the maturity, larger the interest rate. 2. How does time preferences for consumption affect interest rate? 3. How does federal

1. (True/ False. Explain) Longer the maturity, larger the interest rate. 2. How does time preferences for consumption affect interest rate? 3. How does federal budget deficits influence interest rate levels? 4. Your grandfather is giving you an option to choose between two premium bonds. Both have the same coupon rate and required rate of return. However, one pays coupon annually and the other pays coupon semiannually. Which one would you choose? 5. Suppose you know only coupon rate and the required rate of return of a bond. Can you say whether it is issued at discount, premium, or per value? Explain. 6. (True/False. Explain) Bond price approaches face value as maturity decreases, other things held constant. 7. Differentiate price risk and reinvestment risk. 8. What are junk bonds? When are they used

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