1- Which one of the following actions by a financial manager creates an agency problem?

A)Refusing to borrow money when doing so will create losses for the firm.

B)Agreeing to expand the company at the expense of stockholders' value.

C)Increasing current costs in order to increase the market value of the stockholders' equity.

D)Agreeing to pay bonuses based on the market value of the company stock.

E)Refusing to lower selling prices if doing so will reduce the net profits.

2-XYZ, Inc., has a 8.2 percent coupon bond that matures in 8 years. The bond pays interest semi-annually. What is the market price of a $1,000 face value bond if the yield to maturity is 7.4 percent?

A$1,045.18

B $1,047.66

C $1,049.05

D $1,050.10

E $1,051.89

3-The zero coupon bonds of ABC, Inc., have a market price of $267.80, a face value of $1,000, and a yield to maturity of 8.42 percent. How many years is it until these bonds mature?

4- Which bond would most likely possess the highest degree of interest rate risk?

A- 8% coupon rate, 10 years to maturity

B- 8% coupon rate, 20 years to maturity

C- 10% coupon rate, 10 years to maturity

D- 10% coupon rate, 20 years to maturity

E- 12% coupon rate, 20 years to maturity