Question $1$

Which of the following statement$($s$)$ is most correct? $(8$ points$)$

a$.$ As the discount rate increases, the present value of an annuity of $$1$ over next five years decreases.

b$.$ The future value of the ordinary annuity is always smaller than the future value of the same annuity due.

c$.$ As a credit cardholder, you prefer monthly compounding to daily compounding.

d$.$ The value of any assets is based on both risk and the future cash flows.

e$.$ All of the above.

Ouestion $2$

Which of the following statements is most true? $(8$ points$)$

a$.$ The price of fixed$-$coupon bonds will be higher as the coupon rate decreases.

b$.$ The price of convertible bonds will be higher when the issuing firm has lower growth potential.

c$.$ The price of a fixed$-$coupon bond with a callable feature will be higher than that of a fixed$-$coupon bond without a callable feature.

d$.$ The price of a convertible bond is usually lower than the price of a callable bond with the same coupon, face value, and maturity as the convertible bond.

e$.$ None of the above