1. Yields on bonds must be above the effective lower bound because:
a. investors can always hold cash.
b. demand deposits cannot have negative real returns.
c. positive yields are guaranteed by the U.S. Treasury.
d. the technology of banking cannot deal with negative yields.
2. Rhett purchased a 10% zero-coupon bond with a 10-year maturity and a $25,000 par value 10 years ago. The bond matures tomorrow. How much will Rhett receive in total from his investment, assuming all payments are made on these bonds as expected?
A. Rhett will receive the $25,000 which represents the principal and accrued interest on the bond during its lifetime.
B. Rhett will receive the last interest payment of $2500 plus the principal repayment of $25000
C. Rhett wlll receive the last interest payment of $2500
D. Rhett will receive the market price of the bond, which depends on the market interest rate tomorrow.