1. The yield to maturity on a bond is the rate:
a. of return that investors will earn by purchasing the bond
b. of annual interest initially offered when the bond was issued
c. of annual interest paid on the bond
d. of return that sets the present value of the future cash flows equal to the price
2. Which of the following will most likely increase the effective annual rate (EAR) of a loan?
a. Changing from weekly compounding to continuous compounding
b. Decreasing the frequency of the interest compounding
c. Decreasing the annual percentage rate
d. Applying only simple interest
3. Which of the following are positively related to present value?
a. future cash flow
b. interest rate
c. number of periods
d. all of the above