1, The expected 1-year total return is higher than the purchase-date yield to maturity for which of the following reasons?
A. The credit spread for the issuer is expected to narrow. B. The reinvestment rate is expected o be lower than the YTM. C. The coupon rate is higher than the YTM
2, Which of the following statements is least correct with respect to the call risk faced by an institution?
A. The risk relates to the fact that the issuer of a liability may be able to terminate (call) the liability prior to the stated maturity date. B. The consequence of the call will be that the institution has to reinvest at a lower interest rate. C. The consequence of the call will be that the institution has to find alternative funds, and these are likely to be more expensive.