1. A bond investor faces which of the following risk?

A. default risk

B. interest rate risk

C. both default risk and interest rate risk

D. none of the above

2. Which of the following is the ultimate decision rule for a project analysis?

A. profitability index rule B. payback period rule

C. internal rate of return rule

D. net present value rule

3. Which one of the following is the best example of two mutually exclusive projects? A. building a retail store that is attached to a wholesale outlet B. using an empty warehouse to store both raw materials and finished goods C. promoting two products during the same television commercial D. waiting until a machine finishes molding Product A before being able to mold Product B

4. Under which of the following situations, should you NOT use IRR rules to make the project decision?

A. making a decision on whether to open a coffee shop

B. making a decision on whether to build a chemical plant which involves cleaning up chemical wastes when shutting down the project

C. making a decision on an independent project with conventional cash flows

D. making a decision on whether to open a Chinese buffet restaurant