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Which of the following statements is FALSE?A. A bond's yield represents the annualized return that an investor would earn by holding it to maturity, if it does not default.B. Over time as a bond's maturity grows closer, if it does not default and if market yields do not change, then the price on a discount bond will decrease.C. When interest rates increase, then bond prices fall, and more so the longer their maturity and the smaller their coupons.D. If a bond is held to maturity and it does not default, then the reinvestment rate risk will offset the price risk.

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Which formula computes the actual real rate of return on an investment?A) r= (1 + R) - (1 + h)B) r= (1 + R) / (1 + h)C) r= (1 + R) - (1 + h) - 1D) r= (1 + R) / (1 + h) - 1E) R= (1 + r) × (1 + h) - 1
All else constant, a coupon bond that is selling at a premium, must haveA) a yield to maturity that is less than the coupon rate.B) a coupon rate that is equal to the yield to maturity.C) a market price that is less than par value.D) semiannual interest payments.E) a coupon rate that is less than the yield to maturity.
The overall level of interest rates is primarily affected by theA) real rate.B) inflation rate.C) interest rate risk premium.D) liquidity premium.E) default risk premium.

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