A change in expected inflation affects both the supply and demand for bonds.

True/False

A change in the interest rate does not shift the demand for bonds.

True/False

3. An increase in the expected return on bonds causes the _____ bonds to shift and for equilibrium interest rates to

A) demand for, rise.

B) demand for, fall.

C) supply of, rise.

D) supply of, fall.

4.Household wealth affects the equilibrium yield on bonds due to its impact on

A) the demand for bonds.

B) the supply of bonds.

C) the supply and demand for bonds.

D) Inflation has no effect on bond yields.

5. A two-year discount bond with face value $1,000 and price $950 has a yield of

A) 4.9%.

B) 5%.

C) 5.3%.

D) none of the above.

6. A three-year coupon bond has a face value of $1,000, a coupon rate of 7% and a yield to maturity of 10%. The price of the bond must be _____ $1,000.

A) greater than

B) less than

C) equal to

D) cannot be determined

7. A two-year coupon bond has a face value of $1,000, a coupon rate of 5% and a yield to maturity of 2%. What is the price of the bond?

A) $944.21.

B) $1,000.

C) $1,058.25.

D) $1,078.43.

8. A falling real interest rate means nominal rates are falling as well.

True/False

9. A one-year discount bond has a face value of $1,500 and a price of $1,200. What is the yield to maturity

A) 15%

B) 20%

C) 25%

D) 30%

10.After three years, a deposit of $1,000 that compounds annually at an interest rate of 20% returns

A) $1,000.

B)$1,200.

C) $1,440.

D) $1,728.