1) Two firms issue a 5-year bond with a coupon rate of 12% and a par value of $1,000. Firm A pays coupon annually while Firm B pays coupon semiannually. Given a discount rate of 10%, the bond price is greater for Firm B than Firm A. (10points) - True b. False 2) U.S. Treasury sells you a bond for $900. It has no payments until the bond matures 5 years from now, at which time it will be redeemed for $1,000. Then, the discount rate is less than 5%. (10points) - True b. False 3) As the market interest rate decreases, a bond price will decrease. (10points) - True b. False 4) When the yield to maturity is 8% and the coupon rate is 10%, this bond is a premium bond. (10points) - True b. False 5) Stocks have a similar cashflow structure to bonds in terms of periodic dividends and the future stock price while stocks have more volatile cashflow than bonds do. (10points) - True b. False 6) According to Gordon Growth Model (constant dividend growth model), stock price grows at a higher rate than the dividends. (10points) - True b. False 7) While the IRR method makes almost the same decision as the NPV method, we always have a single IRR. (10points) - True b. False 8) Like the Payback Period method, Average Accounting Return method uses an arbitrary benchmark cutoff. (10points) - True b. False 9) When we estimate relevant cashflow for capital budgeting, we include the cost for a market survey conducted before the project is launched. (10points) a. True b. False 10) When we can recognize a larger portion of depreciation in the early period, we will have a higher NPV than when we use the straight-line depreciation method. (10points) - True b. False