1: Maturity risk exists because the prices of longer-term bonds fluctuate more in response to:

a-		government policy changes.
b-		company policy changes.
c-		industry changes.
d-		interest rate changes.

2: Which of the following bond ratings indicate junk bonds?

a-		A/A
b-		Baa/BBB
c-		Ba/BB
d-		B/B
e-		Both c. and d.

3: A stock just paid an annual dividend of $2.00, which is expected to remain constant indefinitely. The market return is 14%. The estimated selling price of the stock is:

a-		$1.76.
b-		$14.29.
c-		$10.43.
d-		None of the above

4: The minimum return that will make an investment acceptable to an investor is called:

a-		the required rate of return.
b-		the risk premium.
c-		the risk-free interest rate.
d-		beta.

5: The first step in capital budgeting is to

a-		reduce the project to a series of cash flows.
b-		determine the difficulty of a project.
c-		compare competing alternatives.
d-		reduce projects to their simplest form.