1. If in determining the yield to maturity on a bond at a given interest rate, you get a value below the current market price, in the next calculation you should use:

• a higher interest rate.

• a lower interest rate.

• a longer maturity.

• a higher coupon payment.

2.

A higher interest rate (discount rate) would:

Multiple Choice

• increase the price of corporate bonds.

• reduce the price of preferred stock.

• increase the price of common stock.

• reduce the cost of dividends.