a. The current interest rates on two-year and thre...

a. The current interest rates on two-year and three-year maturity bonds are 8% and 7%. What is the expected one-year interest rate for year 3？ 1. 2.10% 2. 5.02% 3. 7.05% 4. 10.04% b. Suppose the prevailing quoted annual market yield is 8%. What will a bond with a coupon rate of 6% sell at？ 1. A premium 2. A discount 3. Par 4. €1,000 c. If the short-term treasury bill rate is 6% and expected inflation is 3%, what is the real rate of return？ 1. Exactly 3% 2. Exactly 6% 3. Approximately 3% 4. Approximately 6% d. If markets are semi-strong form efficient, which of the following situations would yield abnormal returns？ 1. Analyzing a company's earnings report 2. Identifying a pattern in a company's stock price 3. Obtaining insider information 4. Following the advice of your broker's newsletter e. You purchased shares of a company in the automotive industry a year ago. Over the course of the last year, the economy has begun to slow down and the company faced declining sales. As a result, the stock price declined over your holding period. Which of the following is true？ 1. This is a violation of strong form market efficiency. 2. This is a violation of semi-strong form market efficiency. 3. This is a violation of weak form market efficiency. 4. This is not a violation of the efficient market hypothesis. f. If market interest rates fall, what happens to bond prices？ 1. They fall. 2. They rise. 3. They rise or fall depending on maturity. 4. They rise relative to equity values. g. Suppose a bond with a face value of €1,000, 8 years remaining until maturity, and carrying a 7% coupon with interest paid annually has a current market price of €942.53. What is the bond's yield to maturity？ 1. 6% 2. 7% 3. 8% 4. 9% h. Suppose the current spot exchange rate is C$1 = £0.35. If interest rates are expected to be 5% in Canada and 3% in the U.K., what is the one-year forward rate？ 1. C$1 = £0.343 2. C$1 = £0.357 3. C$1 = £2.803 4. C$1 = £2.915