1. Short term bonds have interest rate (price) risk and reinvestment rate risk.

A) high; high

B) low; high

C) high; low

D) low; low

2. IF a project's cost of capital increased, what effect would that have on the IRR?

A) The IRR will increase

B) Not enough infomation to determine

C) The IRR may increase or decrease depending on the firm's profitablity

D) The IRR will decrease

E) The IRR will not change

3. You obtain the following data from a stock: D1 = $2.00, g (which is constant) = 6%, and P0= $40. What is the stocks expected dividend yeild for the coming year?

A) 7.0%

B) 8.0%

C) 5.0%

D) 6.0%

E) 4.0%