1. Yields on longer term bonds usually are greater than on shorter term bonds, so the maturity risk premium is more affected by interest rate risk than by reinvestment rate risk.

True

False.

4. Which of the following statements is NOT correct.

Agency problem is that managers may act in their own interests and not on behalf of stockholders.

Corporate governance is the set of rules that control a companys behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community.

Corporate governance can help control agency problems.

Agency problems can be perfectly and permanently solved with corporate governance.

3.

Regarding to the relationship between bond maturity and bond value, whats of the following statements is not correct.

		At maturity, the value of any bond must equal its par value
		The value of a premium bond would decrease to its par value.
		The value of a discount bond would increase to its par value.
		A par-value bond stays at $1,000 even if the market interest rate changes.

4.

Any change in the risk aversion level of investors is likely to affect the required rate of return on a stock, so the change in in the risk aversion level will likely have an impact on the stock's price.

True

False