1. If you expect interest rates to decline and want to make the most money:
a) You prefer a bond with a call option over an identical bond without a call option
b) You prefer short-term bonds over otherwise identical long-term bonds
c) You prefer a bond with a lower coupon rate over an otherwise identical bond with a higher coupon rate
2. If the TIPS coupon is 3.0% (this is the annual rate, the bond pays a coupon twice per year), annual inflation (CPI) is 2%, and the bond par value is $10,000, what is the first coupon payment on the bond?
a) $148.50
b) $150.00
c) $151.50
d) $153.00
e) $300.00
f) $303.00