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A: Bond A has a duration of 3.5 years, Bond B has a duration of 3 years, Bond C has a duration of 4 years,
- A: Bond A has a duration of 3.5 years, Bond B has a duration of 3 years, Bond C has a duration of 4 years, and Bond D has a duration of 1.5 years. Which bond is the most sensitive to an increase in interest rates?
- B: A diversified, low-risk firm is considering investing in a high-risk project in a new industry. Is it appropriate to use the firms WACC as the discount rate when evaluating this project? Why or why not?
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