1. A bond selling at 97.60% of face value means the bonds value is $97.60.

true

false

2. Which of the following statements is true?

Select one:

a. The price of coupon-bond increases with the yield to maturity.

b. The price of bonds increase when market interest rates increase.

c.

d. The price of a zero-coupon bond increases with its maturity.

e. None of THESE

3. Old-Castle Corp. needs to decide between to mutually exclusive projects with a useful life of 4 years. Project A has an initial cost of $9 million and expected cash flows of $3 million at the end years 1 to 4. Project B has an initial cost of $15 million and expected cash flows of 5 million at the end of years 1 to 4. If the discount rate is 10%, which project should the company accept?

Select one:

a. Both projects

b. Neither project

c. Project B

d. Project A