Please answer each multiple choice question

1. The modified duration measure was designed to (a) fix the linear relationship between bond prices and interest rates predicted by the standard mea sure of duration (b) fix the non-linear relationship between bond prices and interest rates predicted by the standard measure of duration (c) fix the linear relationship between bond prices and interest rates predicted by effective duration (d) fix the non-linear relationship between bond prices and interest rates predicted by effective dura- tion 2. If an investor were to replace a low coupon paying bond with a high coupon paying bond in his or her portfolio that investor used which of the following bond trading strategies? (a) yield pick-up swap (b) tax swap (e) bond swap (d) none of the above 3. In which of the answer choices below, both policies result in a reduction in market interest rates? (a) expansionary monetary policy and higher budget deficits (b) expansionary monetary policy and lower budget deficits (c) contractionary monetary policy and higher budget deficits (d) contractionary monetary policy and lower budget deficits 4. Which of the following statements is correct? (a) the maximum profit an investor can make from a put option is unlimited (b) the maximum profit an investor can make from a call option is limited (c) the maximum profit an investor can make from a call option is unlimited (d) both a) and c) 5. What is the yield on a 2 year zero-coupon bond that has a price of $25 and a face value of $100: (a) 0.01% (b) 1% (c) 8% (d) 0.08% (e) none of the above