18 The premium of the long term rate over the 3-months rate

A is increasing over time

B is positive

C is negative

D positive but decreases over time

20 You purchased a share of stock for $20. One year later you received $1 as a dividend and sold the share for $24. What was your holding-period return?

A 20%

B 50%

C 25%

D 40%

E None of the options

19 Assume that the real rate of interest is 1.75% for all maturities. This means

A Expected inflation is higher the longer the investment horizon

B Interest risk uncertainty increases with time

C A and B

D Either A or B

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