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The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000.

Maturity (Years)Price

1$943.40

2$881.68

3$808.88

4$742.09

39.What is, according to the expectations theory, the expected one year forward rate in the third year?

A)7.00%

B)7.33%

C)9.00%

D)11.19%

E)none of the above

40.What is the yield to maturity on a 3-year zero coupon bond?

A)6.37%

B)9.00%

C)7.33%

D)10.00%

E)none of the above

41.When computing yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the:

A)Coupon rate.

B)Current yield.

C)Yield to maturity at the time of the investment.

D)Prevailing yield to maturity at the time interest payments are received.

E)The average yield to maturity throughout the investment period.

42.The yield curve

A)is a graphical depiction of term structure of interest rates.

B)is usually depicted for U. S. Treasuries in order to hold risk constant across maturities and yields.

C)is usually depicted for corporate bonds of different ratings.

D)a and b.

E)a and c.

43.The duration of a bond is a function of the bond's

A)coupon rate.

B)yield to maturity.

C)time to maturity.

D)all of the above.

E)none of the above.

44.Ceteris paribus, the duration of a bond is positively correlated with the bond's

A)time to maturity.

B)coupon rate.

C)yield to maturity.

D)all of the above.

E)none of the above.

45.Holding other factors constant, the interest rate risk of a coupon bond is higher when the bond's:

A)term-to-maturity is lower.

B)coupon rate is higher.

C)yield to maturity is lower.

D)current yield is higher.

E)none of the above.

46.The "modified duration" used by practitioners is equal to the Macaulay duration

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