Suppose the current one-year interest rate is 4, and financial ...

[maychende]

Suppose the current one-year interest rate is 4, and financial markets expect the one-year interest rate next year to be 8. Given this information, the yield to maturity on a two-year bond will be approximately
 
  A) 4.
  B) 6.
  C) 8.
  D) 12.
  E) none of the above

Question 2

The money supply will tend to fall when which of the following occurs?
 
  A) a central bank sale of bonds
  B) a decrease in the ratio of reserves to deposits
  C) a shift in public preferences away from currency to checkable deposits
  D) all of the above
  E) none of the above

[Jevvish]

Answer to Question 1

B

Answer to Question 2

B