1. Suppose that expected inflation decreased from 2% to 1%. What impact would this have on the value of existing stocks and bonds, all else being equal?
A) The value of stocks would increase, while the value of bonds would decrease.
B) The value of stocks would decrease, while the value of stocks would increase.
C) The value of stocks would increase, while the value of bonds would be unaffected.
D) None of the above.
2. A semiannual coupon bond with a face value of $1,000 is selling for $1,078. If the bond's coupon rate is equal to 6.6 percent, and its yield to maturity is 5.7 percent, how many years are left to the bond's maturity date?
A. 10 years B. 8 years C. 12 years D. 6 years