1. Which of the following statements about leverage is not true? A) Leverage can help the firm B) Leverage can hurt the firm C) If EBIT decreases, financial leverage will magnify the change in net income D) Managers that are risk averse are likely to prefer lower amounts of leverage E) All of the above are true

2. If the yield-to-maturity of a bond is more than the coupon rate, the bond will sell at: (A) a discount (B) a premium (C) par value (D) its call price

3. There is an increase in expected inflation. All else equal, bond prices will: (A) rise (B) fall (C) remain unchanged (D) rise then fall to par value