D$.2,4,5,3,1$

B$.5,1,3,2,4$

$7.$ Which of the following are capital market instruments?

A$.10-$year corporate bonds

B$.30-$ycar mortgages

C$.20-$year Treasury bonds

D$.15-$year U$.$S$.$ government agency bonds

E$.$ All of these choices are correct.

$8.$ Convertible bonds will normally have lower promised yields than straight bonds of similar terms and quality.

A$.$ True

B$.$ False

$9.$ Classify each of the following in terms of its effect on interest rates $($increase or decrease:

I. Perceived risk of financial securities increases.

II$.$ Near term spending needs decrease.

III. Future profitability of real investments increases.

A$.$ I increases: II increases: III increases

B$.$ I increases: II increases: III decreases

C$.$ I decreases: II increases: III increases

D$.$ I decreases; II decreases; III decreases

E$.$ None of these choices are correct.

$10.$ Duration usually increase with a bond's maturity.

A$.$ True

B$,$ False

$11.$ An investor requires a $3$ percent increase in purchasing power in order to induce her to $1$ She expects inflation to be $2$ percent next year. The nominal rate she must charge is about:

A$.3$ percent.

B$.2$ percent.

C$.1$ percent.

D$.5$ percent.

E$.7$ percent.

$12.$ Suppose that the current one$-$year Treasury$-$bill rate is $3\mathrm{.}15$ percent and the expected rate $12$ months from now is $4\mathrm{.}25$ per$-$cent. According to the unbiased expectations theory should be the current rate for a two$-$year Treasury security?

A$.3\mathrm{.}70\%$

B$.4\mathrm{.}15\%$

$2$