1. A 30-year Treasury bond is issued with a face value of $1,000 and makes coupon payments of $20 every six months. If relevant market yields decrease shortly after the Treasury bond is issued, what happens to the bond’s coupon rate, current yield, and yield to maturity?
A. all three increase
B. all three decrease.
C. the coupon rate increases, the current yield increases, and the yield to maturity decreases.
D. the coupon rate stays the same, the current yield decreases, and the yield to maturity decreases.
E. the coupon rate stays the same, the current yield increases, and the yield to maturity increases.
2. A release of economic data suggests that the economy is heading for good times, an expansionary period, but that inflationary pressures are increasing. Under such circumstances, the Treasury yield curve is likely to:
A. Increase its upward slope
B. Increase its downward slope
C. Remain unchanged