Question $5$

Which of the following sets of cash flows should you prefer?

$\backslash$table$[[,$Year $1,$Year $2,$Year $3],[$Project $1,5000,4000,3000],[$Project $2,3000,4000,5200],[$Project $3,4000,4000,4000]]$

$($a$)$ Project $1$

$($b$)$ Project $2$

$($c$)$ Project $3$

$($d$)$ All are equally attractive

$($e$)$ Cannot be determined without knowing the discount rate

Question $6$

The zero growth Gordon model treats equities as similar to:

a$)$ annuities

b$)$ perpetuities

c$)$ zero$-$coupon bonds

d$)$ Eurobonds

e$)$ options

Question $7$

Which of the following statements are true?

I. A secondary market is where a company issues new securities in an IPO

II$.$ A secondary market improves liquidity for the issuer, but does not benefit investors

a$)1$

b$)$ II

c$)$ I and II

d$)$ Neither

Question $8$

Which of the following statements are true?

I. A company that fails to pay a dividend to its common equity holders is in default

II$.$ In insolvency equity holders share any remaining asset value only after bondholders and all other creditors have been repaid

a$)1$

b$)$ II

c$)$ I and II

d$)$ Neither

Question $9$

If the $2-$year spot rate is $3\%$ and the $3-$year spot rate is $4\%,$ what is the approximate one$-$year forward rate of interest starting in two years?

a$)3\%$

b$)4\%$

c$)5\%$

d$)6\%$

e$)7\%$

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