A bond has a coupon rate of 5% and a yield to maturity of 6%. Which of the following statements is false?

1. The bond value will increase over time.

2. The bond's capital gains yield will increase over time.

3. The bond is a discount bond.

4. The bond's current yield will increase over time to approach the coupon rate.

5. All the above

2. Which of the following is true regarding WACC?

1. If interest rates rise, corporate WACCs will increase.

2. If tax rates decrease, corporate WACCs will increase.

3. If overall market risk increases, corporate WACCs will increase.

4. All three are true.

5. None of the above.

3. Which of the following is a potential problem with the internal rate of return if a project does not have conventional cash flows?

1. The IRR favors smaller projects.

2. There could be more than one IRR

3. The IRR can't be found.

4. The IRR does not exist.

5. None of the above

4. Two projects are mutually exclusive. Project A has an IRR of 10% and Project B has an IRR of 15%. The crossover rate between the two projects is 12%. Which of the following statements is true?

a. You will prefer project A if the required return is less than 12 %

b. You will be prefer project B if the required return is less than 12 %

c. You will prefer project A if the required return is greater than 12%

d. You will pursue project B if the required return is 18%.

e. none of the above.