Q1) Regarding project selection criteria based on IRR, a project will be considered when:

Select one:

a. IRR is higher than cost of capital.

b. IRR is lower than cost of capital.

c. IRR is greater than cost of capital, but NPV is less than 0.

d. all of the given answers.

Q2) If a bond investor pays $1030 for an annual coupon bond with a face value of $1000, it follows that:

Select one:

a. the coupon rate is higher than the current market yield.

b. the current market yield and coupon rate are equal.

c. the current market yield is higher than the coupon rate.

d. not enough information is given to compare the coupon rate and current market yield.

Q3) Which one of the following statements is true for the concept of matching principle?

Select one:

a. When a company finances its short-term assets with short-term debt

b. When a company finances its long-term assets with short-term debt

c. When a company finances its short-term assets with long-term borrowing

d. When a company uses short-term borrowing to fund the initial investment for a capital budgeting project.

Q4) A rights offering is the issue of:

Select one:

a. proxies to the shareholders to use their voting rights at the annual general meeting.

b. options on shares to the general public.

c. an option to purchase shares directly to the shareholders.

d. special options to the management.