1. The maturity of commercial paper varies from:

a. ?six to twelve months.

b. ?four to eight months.

c. ?one to five months.

d. one to nine months.?

e. five to ten months.?

2. Which of the following types of bonds protects a bondholder against increases in interest rates??

a. ?Mortgage bonds

b. ?Floating-rate bonds

c. ?Municipal bonds

d. ?Income bonds

e. ?Bonds with call provisions

3. Glen wants to take a holiday that costs $8,850, but currently he only has $2,750 saved. If he invests this money at 8 percent interest compounded annually, how long will he have to wait to take his holiday? Use a financial calculator to make the calculation.?

a. 15.19 years?

b. ?14.12 years

c. ?16.25 years

d. ?12.36 years

e. ?13.52 years

4. Treasury securities that mature in 6 years currently have an interest rate of 8.5%. Inflation is expected to be 5% in each of the next three years and 6% each year after the third year. The maturity risk premium is estimated to be 0.1% × (t – 1), where t is equal to the maturity of the bond (i.e., the maturity risk premium of a one-year bond is zero). The real risk-free rate is assumed to be constant over time. What is the real risk-free rate of interest??

a. ?0.25%

b. ?1.75%

c. ?1.00%

d. ?2.50%

e. ?0.50%