8.What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate rises from 5%to 6%per year? (a)A rise of 1%causes a drop of $4.87 in market value. (b)A rise of 1%causes a rise of $4.87 in market value. (c)A rise of 1%causes a drop of $8.09 in market value. (d)A rise of 1%causes a rise of $8.09 in market value. Answer:(c) 9.What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate falls from 6%to 5%per year? (a)A fall of 1%causes a drop of $4.87 in market value. (b)A fall of 1%causes a rise of $4.87 in market value. (c)A fall of 1%causes a drop of $8.09 in market value. (d)A fall of 1%causes a rise of $8.09 in market value. Answer:(d) 10.A zero-coupon bond is also known as (a)a perpetual bond (b)a pure discount bond (c)a market rebate (d)an infinite bond Answer:(b) 11.The promised cash payment on a pure discount bond is called its (a)face value (b)par value (c)fixed interest (d)both a and b Answer:(d) 8-38-3 8. What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate rises from 5% to 6% per year? (a) A rise of 1% causes a drop of $4.87 in market value. (b) A rise of 1% causes a rise of $4.87 in market value. (c) A rise of 1% causes a drop of $8.09 in market value. (d) A rise of 1% causes a rise of $8.09 in market value. Answer: (c) 9. What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate falls from 6% to 5% per year? (a) A fall of 1% causes a drop of $4.87 in market value. (b) A fall of 1% causes a rise of $4.87 in market value. (c) A fall of 1% causes a drop of $8.09 in market value. (d) A fall of 1% causes a rise of $8.09 in market value. Answer: (d) 10. A zero-coupon bond is also known as ________. (a) a perpetual bond (b) a pure discount bond (c) a market rebate (d) an infinite bond Answer: (b) 11. The promised cash payment on a pure discount bond is called its ________. (a) face value (b) par value (c) fixed interest (d) both a and b Answer: (d)