Part I. Multiple choice: Clearly write the best answer in the following table. Each problem is worth points for a total of 10 questions. No partial credit will be given for these problems. No credit will be given for a question if you do not write the correct answer in the following table. Question Answer 10 1. Which of the following statements about a callable bond is TRUE? A) Callable bonds follow the standard inverse relationship between interest rates and price. B) A bondholder usually loses if a bond is called by being forced to reinvest the proceeds at a lower interest rate. C) The call option on a bond trades separately from the bond itself 2. All else held equal, the duration of bonds selling at higher yields compared to bonds selling at lower yields will be: A) cannot be determined with the information given. B) greater. cylower 3. Jackson Thompson is studying the relationships between a bond's coupon rate and the required market yield. One study question concerns anew issue 15-year, $1,000 face value 675% semi-annual coupon bond priced at $1,075. Which of the following choices and the relationship of the bond's market yield to the coupon? A) Discount bond, required market yield is greater than 6.75%. B) Premium bond, required market yield is greater than 6.75%. C) Premium bond, required market yield is less than 6.75%. deseribes the bond C) five yar,option-free 4% coupon rate 5. In December 2014, an investor purchases a zero-couporn 4. Which of the following bonds has the highest interest rate sensitivity? A: A) ten year, option-free 6% coupon bond B) ten year, option-free 4% coupon bond. C) five year, 5% coupon bond callable in one year bond issued in 2008 and maturing in 14? What is the bond's approximate duration in 20 December 2018. A) 10 years. B) 4 years C) Cannot be determined