11. Which one of the following is the pretax cost of debt? A. Average coupon rate on the firm's outstanding bonds B. Weighted average yield to maturity on the firm's outstanding debt C. Average current yield on the firm's outstanding debt D. Annual interest divided by the market price per bond for the latest bond issue rice per band for the latest bond issue brod s 00012 AOS 12. About payback period, which of the following is CORRECT: A. The payback rule states that you should accept a project if the payback period is less than one year. B. The payback period ignores the time value of money. C. The payback rule is biased in favor of long-term projects. D. The payback period considers the timing and amounts of all of a project's cash flows. 13. Which of the following is NOT correct about bond market: A. US bond market is larger in size (market value) than the stock market. B. Bond market is generally less liquid than the stock market. C. Treasury Bills and Treasury Notes are different types of Treasury STRIPS. D. Treasury securities are usually considered free of default risk. son 14. Limited liability describes a situation where: A. The responsibility of shareholders for the company's debts is limited to the value of their personal wealth. B. All shareholders must hold a minimum of 20 shares in a company. C. The responsibility of shareholders for the company's debts is limited to the amount they paid for the shares. D. All shareholders are equally responsible for all the debts of the company. 15. The market value of an 18-year zero-coupon bond with a maturity value of $1,000 discounted at 12% annual interest rate with semi-annual compounding is closest to: A. $192.86 B. $130.04 C. $122.74 D. $55.56 16. In capital budgeting, the NPV method is preferred to other alternatives such as Pl or IRR. What is the justification: A. Financial management seeks to maximize firm's profit margin. B. Financial management seeks to maximize firm's market value. C. Financial management seeks to maximize firm's price-earnings ratio. D. Financial management seeks to maximize firm's ROE. 17. Which of the following statements is NOT correct about Risk and Return? A. Risk/return trade-off says higher (lower) risk is associated with higher (lower) average return. R Rick.adiusted rate of return used in DDM is adjusted such that it contains no risk