1. If a medium maturity coupon bond is issued at a DISCOUNT, then over its first year, its price will ________. Assume that interest rates and the companys default risk premium dont change.

a. remain unchanged

b. fall

c. rise

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2. An increase in a firms market risk should be reflected in what part of the Gordon growth model?

	a.	the required return
	b.	the dividend growth rate
	c.	next years dividend

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3. You overhear the Governor of the Bank of Canada reveal that the Bank of Canada is going to lower interest rates. This will come as a complete surprise to the market. If you wanted to profit from this knowledge, then which investment strategy would you adopt?

	a.	short sell short maturity bonds
	b.	short sell long maturity bonds
	c.	buy short maturity bonds
	d.	buy long maturity bonds