3. Suppose a bonds price is expected to decrease by 5% if its market discount rate increases by 100 bps. If the bonds market discount rate decreases by 100 bps, the bond price is most likely to increase by:

a) 5%

b) Less than 5%

c) More than 5%

d) none of the above.

4. An investor is considering the purchase of a 2-year bond with a 5% coupon rate, with interest paid annually. Assuming the following sequence of spot rate: 1 year, 3% and 2 year, 4%, the yield to maturity of the bond is:

a) 3.98%

b) 3.50%

c) 2.89%

d) none of the above.

12. Given the following government bond yields: one-year, 2% and five-year, 7%. What is the twoyear government bond yield one would linearly interpolate from this information?

a) 3.25%

b) 4.50%

c) 3.67%

d) none of the above.

13. A bond with 20 years remaining until maturity is currently trading at 111 per 100 of par value. The bond offers a 5% coupon rate with interest paid semiannually. The bonds annual yield-tomaturity is closest to:

a) 2.09%

b) 4.18%

c) 4.50%

d) none of the above.

14. A 365-day year bank certificate of deposit has an initial principal amount of USD 96.5 million and a redemption amount due at maturity of USD 100 million. The number of days between settlement and maturity is 350. The bond equivalent yield is closest to:

a) 3.48%

b) 3.65%

c) 3.78%

d) none of the above.