1) The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that statement true or false? Explain. (Hint: Make up a "reasonable" example based on a 1-year and a 20-year bond to help answer the question.)

2) If interest rates rise after a bond issue, what will happen to the bond's price and YTM? Does the time to maturity affect the extent to which interest rate changes affect the bond's price? (Again, an example might help you answer this question.)

3) It is frequently stated that the one purpose of the preemptive right is to allow individuals to maintain their proportionate share of the ownership and control of a corporation.

1. How important do you suppose control is for the average stockholder of a firm whose shares are traded on the New York Stock Exchange?
2. Is the control issue likely to be of more important to stockholders of publicly owned or closely held (private) firms? Explain.

4) If you bought a share of common stock, you would probably expect to receive dividends plus an eventual capital gain. Would the distribution between the dividend yield and the capital gains yield be influence by the firm's decision to pay more dividends rather than to retain and reinvest more of its earnings? Explain.