Determine if these statements are true or false.

1. True or False: The penalty for spending before earning is the interest rate from the point of view of the borrower.

2. True or False: The Fisher Effect illustrates the positive relationship between inflation and nominal interest rates.

3. True or False:  Ceteris paribus, as the frequency of compounding decreases, the EAR will exceed theAPR by greater and greater amounts.

4. True or False: The EAR will always be greater than the APR.

5. True or False: We can find the nominal interest rate by dividing the default and maturity premiums from the sum of the real rate and inflation.

6. True or False: In the period 1950 – 1999 changes in the inflation premium was the main factor causing nominal interest rates to change.

7. True or False: Interest rates were high in the late 1970s and early 1980s because of unusually high default premiums.

8. True or False: A $1,000 par value bond with an annual coupon rate of 10% would pay $100 in interest every 6 months.

9. True or False: Premium bonds are always worth more than par value at maturity.