Fill in the blanks: The market value of a bond is the present value of its ________ and __________ payments. (page 60)
What is meant by a bond's yield to maturity and how is it calculated? (page 61 )
If interest rates rise, do bond prices rise or fall? (page 63)
If interest rates change, do prices of long bonds change by more or less than those of short bonds? (page 63)
If a U.S. Treasury bond is quoted to yield 6%, is the annual compound yield more or less than 6%? (page 63)
Explain the difference between the spot rate of interest, the forward rate and the yield to maturity on a bond. (pages 67-69)
What is a strip? How can strips be used to measure spot rates? (page 69)
How can you calculate a bond's duration? If two bonds have the same maturity, but different coupons, which has the longer duration? Which is the more volatile? (pages 63-65)
What does the expectations theory say about the relationship between forward rates and future spot rates? (pages 70-71)
Explain the difference between a conventional bond and an indexed bond. Why can't you directly compare the yields on the two bonds? (pages 74-75)
What does the real rate of interest depend on? (page 74-75)
What did Fisher say about the relationship between inflation and interest rates? (pages 76)
