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6. Which of the following statements is TRUE? A. When we refer to the risk-free interest rate, we mean the rate on the best performing

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6. Which of the following statements is TRUE? A. When we refer to the "risk-free interest rate," we mean the rate on the best performing company. B. Interest rates do not vary with investment horizon. C. All borrowers, except the U.S. Treasury, have some risk of default. D. When interest on a loan is tax deductible, the effective after-tax interest rate is r - t. 1. A bank is charging 4% interest APR on bank loans. If you are borrowing a loan, which compounding frequency do you prefer? A. Annually B. Semiannually C. Monthly D. Daily 8. Which of the following statements is FALSE with respect to the sensitivity of a bond price to interest rate changes, other things being equal? A. Bonds with low coupon rates are more sensitive to interest changes than those with high coupon rates for the same maturities B. Bonds with high coupon rates are more sensitive to interest changes than those with low coupon rates for the same maturities C. Long-term bonds' prices are more sensitive to interest changes than short term bonds for the same coupon rates D. Long-term low-coupon bonds' prices are more sensitive to interest changes than short-term high-coupon bonds 9. Which of the following will NOT increase a company's total dividend payments? A. Issue more shares. B. Increase earnings. C. Increase dividend payout rate. D. None of the above

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