10. If interest rates go up after you purchase a corporate bond: a. The market value of the bond is unaffected. b. The market value of the bond increases. c. The coupon payments increase. d. The market value of the bond decreases. 11. Wilson Enterprises' bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield? a. 7.14% b. 7.50% c. 7.62% d. 6.47% e. 8.68% 12. 13. The yield curve is usually upward sloping because of the a. Inflation premium. b. Liquidity premium. c. Maturity risk premium. d. Default risk premium Cooley Company's stock has a beta of 1.40, the risk-free rate is 4.00%, and the market risk premium is 5.50%. What is the firm's required rate of return? a. 11.21% b. 11.70% c. 12.05% d. 12.25% e. 12.55% 14. The security market line a Indicates which firms are earning positive profits. b. Relates the inflation rate to the real risk-free interest rate. c. Indicates a firm's required rate of retum given the firm's beta coefficient. d. Determines returns on treasury bills and bonds. What happens to the security market line if the risk-free interest rate increases? 2. It becomes kinked. b. It makes a parallel shift upward. c. It pivots upward from the y-axis intercept. d. It makes a parallel shift downward. 15