Multiple Choices (15x3-45 points) 1. In the event of the firm's bankruptcy: ost shareholders can lose is their original investment in the firm's stock olders have claim to what is left from the liquidation of the firm's assets after paying the C) The claims of prefered shareholders are honored before those of the common shareholders shareholders. (D) A and C 9% and a par value of $1,000. If the bond matures in 8 14 2. A zero-coupon bond has a yield to maturity of years, the bond should sell for a price of today (A) $513.16 (B) S501.87 (C) $483.49 (D) none of the above 3. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams you prefer? Yearl Year2 Year3 Year4 A) $400 $300 $200 $100 B) $100 $200 $300 $400 C) $250 $250 $250 $250 D) Any of the above, since they each sum to $1,000. 4. If you were a bondholder lending to a firm and you were worried that stockholders would take advantage of you, which of the following actions would concern you the most? (A) A cut in the dividends paid to stockholders (B) Expansion into a risky new business (C) Accumulation of cash in the company (D) A new stock issue 5. A rich aunt has promised you $5000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 5% larger than the last payment. She will continue to show this generosity for 20 years, giving a total of 20 payments. If the interest rate is 5%, what is her promise worth today? A) $95,238 B) S100,000 C) $95,476 D) $95,842