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Q18. The value of the firm, when we allow for taxes. bankruptcy, and agency cos a. first decines and then ultimately rises with increasing levels of financial leverage b. first increases and then ultimately declnes with increasing levels of financial leveroge c. remains constant with increasing levels of financial leverage d. increases with increasing levels of financial leverage e. decreases with increasing levels of financial leverage Q19. According to the signaling theory, what is asymmetric information? a. The situation in which investors and managers have identical information about the fims b. The situation in which employees and managers have identical information about the fms ts situation in which investors and creditors have identical information about the fems d. The situation in which managers have different (better) information about their fem's prospects than outside investors e. The situation in which employees have different (better) information about their tim's prospects than managers Q20. Holding other factors constant, the interest-rate risk of a coupon bond is highor when the bond's: a. term-to-maturity is lower b. coupon rate is higher C. yield to maturity is higher d. All of these are cormect e. None of these is correct. Q21. Holding other factors constant, which one of the following bonds has the smallest price sensitivity to the change of the yield to maturity a, 5-year 7% coupon bond b. 5-year, 8% coupon bond c, 25-year, 8% coupon bond d, 25-year. 7% coupon bond e. Cannot tel from the information given. Q22. Convenity of bonds is less important when interest rates are: a expected to change very little b. expected to change widely c. less than the coupon rate on the bond d. equal to the coupon rate on the bond e. high Q23. A bond initially issued at a price of $1022 has a modified duration of 4. Which one a, " the market yield increases by i%the bonds pice wil icrease by S40. b. If the market yieldincreases by 1%the bond's price wil decrease by $10 C. If the market yield ncreases by 1% the bond's price wd decrease by S4088. d.If the merket yield ncreases by 1%the bonds price wil ncrease by S4088. e. None of these is comect Paps