QUESTION $22$

Treasury bid and ask quotes are sometimes given in terms of yields, so there would be a bid yield and an ask yield. Which do you think would be larger? Explain.

Prices and yields move in opposite directions. Since the bid price must be lower, the bid yield must be higher.

Prices and yields move in the same directions. Since the bid price must be lower, the bid yield must be higher.

Prices and yields move in opposite directions. Since the bid price must be higher, the bid yield must be lower.

QUESTION $23$

Are there any circumstances under which an investor might be more concerned about the nominal return on an investment than the real return?

years in the future. If those payments are not fixed in dollar terms, then it is the nominal return on an investment that is important.

QUESTION $24$

so is strictly voluntary. Why do you think they do it$?$

Companies pay to have their bonds rated because unrated bonds can be difficult to sell; many large investors are prohibited from investing in unrated issues.

Companies pay to have their bonds rated because it is in their self$-$interest to secure the highest rating for their bond. The lower the bond rating the harder it is to sell the bond.

Companies pay to have their bonds rated because the bond companies offer advertisement and endorsement which allows the company to sell the bond easily.