1. When leveraged buyout (LBO) activity increases, so does the issuance of high-yield bonds. In this situation you would expect to see, all else equal,

A. The supply of bonds increases accompanied by an increase in price

B. The supply of bonds increases accompanied by a decrease in price

C. The demand for bonds decreases accompanied by an increase in price

D. The demand for bonds increases accompanied by a decrease in price

2. Which of the following statements is true about inflation and market yields?

A. Nominal yields will fully adjust to changes in expected inflation

B. Nominal yields will fully adjust to actual inflation

C. Nominal yields will only partially adjust to changes in expected inflation

D. Nominal yield will only partially adjust to changes in actual inflation

3. Which of the following statements is true about the yield curve?

A. When short term rates are high, long-term rates are at their lowest levels

B. The yield curve is generally flat

C. Short term yields move more than long-term yields

D. All of the above are true

4. Capital markets instruments (or securities) include

A. Commercial paper, callable corporate debt, and mortgage bonds

B. Callable corporate debt, repurchase agreements, and convertible debt

C. Yankee CDs, commercial paper, and repurchase agreements

D. Callable corporate debt, mortgage bonds, and convertible debt

5. Which of the following statements is NOT true about market linkages?

A. The 2-year UST yield provides good insight into future Fed policy actions

B. An increase in the Fed policy rate will have a 1:1 impact on the 10-year UST note yield

C. An increase in the Fed policy rate will have a 1:1 impact on money market yields

D. All else equal, stock indexes should move in the same direction as bond prices when the 10-year Treasury yield changes