1) If a bond rating agencies adjusts the risk of an outstanding bond lower it is called a(n)_

a) Upgrade

b) default

c) downgrade

d) bankruptcy

2) Bond ratings are critical to a company issuing debt since the rating determines the risk of the bond and impacts the ___________ a company must pay.

a) origination fees

b) Interest rate

c) flotation costs

d) none of the above

3) If market interest rates decline:

a) Short-term bonds will decline in value more than long-term bonds.

b) Long-term bonds will rise in value more than short-term bonds.

c) Long-term bonds will decline in value more than short-term bonds.

d) Short-term bonds will rise in value more than long-term bonds.

Which of the following affect an assets value to an investor?

1. Amount of an assets expected cash flow

2) The riskiness of the cash flow

3) Timing of an assets cash flows

4) Investors required rate of return

a) 1,3,4

b) 1,2,4

c) 1,2,3

d)1,2,3,4