121. Suppose the real rate is 9.5 percent and the

inflation rate is 1.8 percent. What rate would you expect to see on a Treasury

bill?

A. 9.50 percent

B. 11.30 percent

C. 11.47 percent

D. 11.56 percent

E. 11.60 percent

122. An investment offers a 10.5 percent total return

over the coming year. Sam Bernanke thinks the total real return on this

investment will be only 4.5 percent. What does Sam believe the inflation rate

will be for the next year?

A. 5.60 percent

B. 5.67 percent

C. 5.74 percent

D. 6.00 percent

E. 6.21 percent

123. Bond S is a 4 percent coupon bond. Bond T is a 10

percent coupon bond. Both bonds have 11 years to maturity, make semiannual payments,

and have a yield-to-maturity of 7 percent. If interest rates suddenly rise by 2

percent, what will the percentage change in the price of Bond T be?

A. -15.16 percent

B. -14.87 percent

C. -13.56 percent

D. -12.92 percent

E. -12.67 percent

124. Technical Sales, Inc. has 6.6 percent coupon

bonds on the market with 9 years left to maturity. The bonds make semiannual

payments and currently sell for 88.79 percent of par. What is the effective

annual yield?

A. 8.34 percent

B. 8.40 percent

C. 8.52 percent

D. 8.58 percent

E. 8.60 percent

125. Bonner Metals wants to issue new 18-year bonds

for some much-needed expansion projects. The company currently has 11 percent

bonds on the market that sell for $1,459.51, make semiannual payments, and

mature in 18 years. What should the coupon rate be on the new bonds if the firm

wants to sell them at par?

A. 5.75 percent

B. 6.23 percent

C. 6.41 percent

D. 6.60 percent

E. 6.79 percent

126. You purchase a bond with an invoice price of

$1,460. The bond has a coupon rate of 9.4 percent, and there are 3 months to

the next semiannual coupon date. What is the clean price of this bond?

A. $1,436.50

B. $1,452.17

C. $1,460.00

D. $1,467.83

E. $1,483.50

127. Suppose the following bond quote for the Beta

Company appears in the financial page of today’s newspaper. Assume the bond has

a face value of $1,000 and the current date is April 15, 2009. What is the

yield to maturity on this bond?

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A. 6.64 percent

B. 8.96 percent

C. 10.23 percent

D. 12.47 percent

E. 13.27 percent

128. You want to have $1.04 million in real dollars in

an account when you retire in 46 years. The nominal return on your investment

is 8 percent and the inflation rate is 3.5 percent. What is the real amount you

must deposit each year to achieve your goal?

A. $6,667.67

B. $6,878.49

C. $7,433.02

D. $7,515.09

E. $7,744.12

129. The yield-to-maturity on a bond is the interest

rate you earn on your investment if interest rates do not change. If you

actually sell the bond before it matures, your realized return is known as the

holding period yield. Suppose that today, you buy a 12 percent annual coupon

bond for $1,000. The bond has 13 years to maturity. Two years from now, the

yield-to-maturity has declined to 11 percent and you decide to sell. What is your

holding period yield?

A. 8.84 percent

B. 9.49 percent

C. 12.00 percent

D. 13.01 percent

E. 14.89 percent