Reference no: EM133070378

1. Suppose the one-year spot rate r 1= 5% and the two-year rate r 2 = 6%. At time 0 you enter into a forward contract to buy, in exactly one year from now, a one-year zero-coupon bond. Suppose that in one year from now the term structure of interest rates changes, so that a one year rate becomes 6%. Will you experience a pro?t or a loss on your forward contract?

A. No effect

B. Profit

C. Loss

D. It could go either way, impossible to tell from provided data

2. A ten-year bond with a coupon rate of 6% and a face value of $100 is priced at $98. Let the yield to maturity be denoted by y. Which of the following statements is true:

A. y = 6%

B. y < 6%

C. y > 6%

D. It could go either way, impossible to tell from provided data

3. Consider two treasury bonds, A and B. Both have 5 years to maturity, A pays a 5% coupon rate, B pays a 7% coupon rate. Which of bonds A and B has higher modi?ed duration

A. Bond A

B. Bond B

C. The same for Bond A or B

D. It could go either way, impossible to tell from provided data

4. Holding the one-year real interest rate constant, if the nominal one-year interest rate where to increase by 1%, it would imply that the in?ation rate over the same period

A. Increased

B. Decreased

C. Stayed the same

D. It could go either way, impossible to tell from provided data