1. A security will make payments of $25 per month for the next 5 years, plus $1000 at maturity. Which of the following is true?
If the price increases from $1,500 to $1,600 then the yield to maturity will increase.
If the price increases from $1,500 to $1,600 then the period rate will be more than the nominal rate
If the price increases from $1,500 to $1,600 then the yield to maturity will decrease.
If the price increases from $1,500 to $1,600 then the effective rate will increase
2. You deposit $300 in a bank account that pays an interest rate of 6%. Which of the following is true?
A higher interest rate will result in a lower future value.
A higher interest rate will require a larger number of periods to reach a future value of $500.
Monthly compounding will result in a higher effective rate than daily compounding.
Quarterly compounding will result in a higher effective rate than semi-annual compounding.