1. All other parameters held constant, as the spread between the yield and the coupon rate on a bond decreases, the price of the bond

• A. falls further below par.
• B. rises further above par.
• C. gets closer to par.
• D. approaches infinity.

2. If the net present value of a project is negative, then

• A. the discount rate used for the future expected cash flows is less than the internal rate of return for the project.
• B. the discount rate used for the future expected cash flows is incorrect.
• C. the discount rate used for the future expected cash flows is greater than the internal rate of return for the project.
• D. the discount rate used for the future expected cash flows is equal to the internal rate of return for the project.

3. The net present value of a project has been found to be $0. The internal rate of return on the project is 9.6%. If a discount rate of 7.0% had been used instead to determine the net present value, then

• A. The project would have been accepted.
• B. The internal rate of return would have changed.
• C. The net present value would have stayed the same.
• D. The project would have been rejected.