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
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