SECTION I:THE TRUTH WILL SET YOU FREE, BUT FALSE REQUIRES AN EXPLANATION Questions 1-3 (15 points total) True or False, Explain: (15 points total–5 points each question) Use the following information to determine whether the statements are true or false.Check the appropriate box.If the statement is false AND ONLY if it is false provide aBRIEF explanation as to why it is false(BRIEF means AT MOST a few sentences). Show work if necessary. 1.For every bond, regardless of the time remaining to maturity, the coupon rate decreases when bond prices rise.
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22.Assume that all rates are strictly positive, and that you have two cash flow streams which are identical in all aspects EXCEPT timing (i.e. SAME risk, SAME size of payments, SAME number of payments).The first cash flow stream is an annuity due (payments at the beginning of the period) while the second is an ordinary annuity with the same cash flows (i.e. the SAME payments at the end of the period) Statement: At any given point in time, the annuity due has a higher future value than the ordinary annuity