Multiple choice

1. The relationship between a bond's price and the yield to maturity:

A. changes at a constant level for each percentage change of yield to maturity.

B. is an inverse relationship.

C. is a linear relationship.

D. has no relationship.

2.The longer the time to maturity:

A. the greater the price increase from an increase in interest rates.

B. the less the price increase from an increase in interest rates.

C. the greater the price increase from a decrease in interest rates.

D. the less the price decrease from a decrease in interest rates.

3. What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952?

A. 10.5%

B. 10.6%

C. 11.9%

D. 12.0%

 4. A higher interest rate (discount rate) would:

A. reduce the price of corporate bonds.

B. reduce the price of preferred stock.

C. reduce the price of common stock.

D. all of the above