If a one-year bond currently yields 4% and is expected to yield 6% next year, the liquidity

premium theory suggests the yield today on a two-year bond will be:

a. More than 4% but less than 5%.

b. 5%.

c. 4%.

d. More than 5%.

A borrower who has to pay an interest rate of 8% rather than 6% due to risk spread will pay:

a. $20 more in interest annually for every $100 borrowed.

b. 33.3% higher interest in dollar terms.

c. 2% in net interest.

d. less interest in total over the life of the loan.

If the Dow Jones Industrial Average is at 10,205 and it is up 4% from the previous day, what was the index at the close of the market the previous day?

a. 10,201.0

b. 9,805.0

c. 9,812.5

d. 9800. 0

please show your work, thank you.