Question 6

If a bond has a coupon rate of 8.5% and a bond yield of 8.0%,

the bond price will be ________ than the par value of $1,000.

Group of answer choices

lower

higher

Question 7

Asset X has a beta of 1.0. The market risk premium is 6% and the risk-free rate is 4%.

Based on your own forecast, Asset X would offer you a return of 12%. I.e., the forecast return is 12%.

The return from CAPM is __________% and you would ____________ the stock.

Group of answer choices

11; buy

9: sell

9: buy

11: sell

10: sell

10; buy

Question 8

You are using a financial calculator to estimate the price of a $1,000 par value bond with a 9% annual coupon rate paid semiannually. The bond is priced to yield 5% and it has 9 years to maturity.

You have inputted I/Y = 2.5 and FV = 1000 in your financial calculator.

You should input the values of N = and PMT = in your financial calculator.

Question 9

The payback rule is _____________ to understand and it biases towards ___________ projects

Group of answer choices

easy; short-term

difficult; long-term

easy; long-term

difficult; short-term

Question 10

Which of the following is TRUE?

I. A firm can go bankrupt for not declaring dividends.

II. Dividend payments are not considered a business expense; therefore, they are not tax deductible.

Group of answer choices

Neither I nor II

I and II

I only

II only