1.Which of the following statements correctly describe how the present value of a future expected cash flow may vary with different factors?

a.As the risk associated with a future expected cash flow increases, then, holding all else constant, the present value of the cash flow will decrease.

b. As the expected loss of purchasing power due to inflation increases, then, holding all else constant, the present value of a future expected cash flow will decrease.

c.More than one of the other options are correct.

d. As the period of time we have to wait until we receive a future expected cash flow decreases, then, holding all else constant, the present value of the cash flow will decrease.

2.Which of the following characteristics is a necessary feature for pricing a set of cash flows as an ordinary annuity?

a. The cash flows must occur on a yearly basis.

b.More than one of the other options are correct.

c.The cash flows must not be a fixed, regular amount.

d.The period of time between each cash flow must not vary.

3.Which of the following statements correctly describes the sensitivity of a bonds price to a change in market yields?

a.The price of a zero-coupon bond with four years until expiry is going to be more sensitive to changes in market yields than the price of a coupon paying bond issued by the same company with the same term to expiry.

b.Holding all other factors constant, the higher the coupon rate, the more sensitive is a bonds price to changing market yields.

c.Holding all other factors constant, the longer the term to expiry, the more sensitive a bonds price is to changing market yields.

d.More than one of the other statements are correct.