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Student Name (Please Print) 36) A time line is meaningful even if all cash flows do not occur annually. A. True B. False 37) When a loan is amortized, a relatively low percentage of the payment goes to reduce the outstanding principal in the early years, and the principal repayment's percentage increases in the loan's later years. A. True B. False 38) One of the four most fundamental factors that affect the cost of money as discussed in the text is the risk inherent in a given security. The higher the risk, the higher the security's required return, other things held constant. A True B. False 39) Three $1,000 face value, 10-year, non-callable, bonds have the same amount of risk, hence their YTMs are equal. Bond 8 has an 8% annual coupon, Bond 10 has a 10% annual coupon, and Bond 12 has a 12% annual coupon. Bond 10 sells at par. Assuming that interest rates remain constant for the next 10 years, which of the following statements is CORRECT? A. Bond 8's current yield will increase each year. B. Since the bonds have the same YTM, they should all have the same price, and since interest rates are not expected to change, their prices should all remain at their current levels until maturity. C. Bond 12 sells at a premium (its price is greater than par), and its price is expected to Increase over the next year. D. Bond 8 sells at a discount (its price is less than par), and its price is expected to increase over the next year. 40) Morin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65. The market requires an interest rate of 6.1% on these bonds. What is the band's price? A. $1,024.74 B. $1,147.71 C. $1,116.97 D. $1,096.47 Page 9 of 12