1. A "make-whole" call provision on a bond provides for:

a call price equal to the face value.

decreasing call prices as interest rates decrease.

call prices that vary with the funds available in a sinking fund.

a call price equal to the bond's approximate market value at the time of call.

a call price equal to the face value plus all accrued interest to date.

2. Toni's Tools is comparing machines to determine which one to purchase. The machines sell for differing prices, have differing operating costs, differing machine lives, and will be replaced when worn out. These machines should be compared using:

the replacement parts approach.

net present value only.

both net present value and the internal rate of return.

the equivalent annual cost method.

the depreciation tax shield approach.

3. A market participant who buys and sells securities from inventory is called a:

capitalist.

broker.

trader.

principal.

dealer.

4. If the nominal rate of return on a bond is 8.59 percent and the real rate is 3.87 percent, what is the rate of inflation?

5.39%

12.46%

13.82%

6.87%

4.54%

5. Last week, Railway Cabooses paid its annual dividend of $1.20 a share. The company has been reducing its dividends by 6 percent each year. What is one share of stock worth at a required return of 14 percent?

$15.90

$14.10

$10.80

$8.06

$5.64