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

#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 equal to the internal rate of return for the project.
• C. the discount rate used for the future expected cash flows is incorrect.
• D. the discount rate used for the future expected cash flows is greater than 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 project would have been rejected.
• D. The net present value would have stayed the same.

#4 Which statement is false?

• A. Shareholders can vote by proxy for members of the board of directors, but they are not required to vote that way.
• B. Only financial institutions can provide financial intermediation.
• C. A corporation is not required to pay a dividend to its common shareholders.
• D. As a general rule, a lower beta indicates a less risky stock in a well-diversified portfolio.