Q$1$: Assume a $$1,000$ Treasury bill is quoted to pay $6\%$ interest over a three$-$month

period. What will be the effective yield?

A$.6\mathrm{.}09\%$

B$.6\mathrm{.}38\%$

C$.3\mathrm{.}05\%$

D$.25\mathrm{.}53\%$

Q$2$: You buy a zero$-$coupon bond for $$250\mathrm{.}00$ and $10$ years later sell it for $$591\mathrm{.}84.$

What annualized rate of return did you earn?

A$.13\mathrm{.}67\%$

B$.4\mathrm{.}24\%$

C$.9\mathrm{.}00\%$

D$.2\mathrm{.}36\%$

Q$3$: When is the best time to convert a convertible bond to common stock?

A$.$ When the call price exceeds the conversion value

B$.$ After the conversion ratio decreases

C$.$ When the conversion value is below the pure bond value

D$.$ None of the above