pt1) Which of the following bonds prices would be most sensitive to changes in interest rates?

a. a 2 year bond with a small coupon

b. a 2 year bond with a large coupon

c. a 30 year bond with a small coupon

d. a 30 year bond with a large coupon

pt 2) Which of the following is false?

a. If a firm's projects differ in risk, then one way of handling this problem is to evaluate each project with the appropriate risk-adjusted discount rate.

b. All incremental cash flows should be considered when making accept/reject decisions for capital budgeting projects.

c. Investments in net operating working capital should not be considered in a capital budgeting cash flow analysis because capital budgeting relates to fixed assets, not working capital.

d. If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land.