1. How an increase in interest rate affects bond prices?

A: It increases the price of premium bonds and decrease the price of discounted bonds

B: It decreases the price of premium bonds and increase the price of discounted bonds

C: It increases the price of both premium and discounted bonds

D: It decreases the price of both premium and discounted bonds

2. What can you say about a bond with YTM>YTC

A: Most likely, it is underpriced

B: Most likely, it is overpriced

C: Most likely, it will be called

D: Most likely, it will not be called

3. What can you say about a bond if its price has increased since last year while its YTM remained the same?

A: The bond is risky

B: The bond is risk free

C: The bond is selling at a discount

D: The bond's rating has been improved

4. Consider a stock that is expected to pay $2 dividends next year, $3 dividends in 2 years, $4 dividends in 3 years, and, after that, the dividends are expected to grow at a constant rate of 6% per year forever. The stock's required return is 14%. Find the current stock price.

A: $42.54

B: $37.81

C: $47.29

D: $44.16

5. The standard deviation of the stock of SafeComp is equal to 16% and its beta coefficient is equal to 0.8. The beta coefficient of RiskyComp is equal to 1.2. Assume the risk-free interest rate is equal to 0%. What can you say about the standard deviation of RiskyComp stock return?

A: It is equal to 24%

B: It is equal to 36%

C: It is at least 16% but it is neither 34 or 36%

D: None of the above