<1> The current yield of a bond is defined as the annual interest on a bond divided by which one of the following?

a. coupon

b. market price

c. par value

d. call price

e. face value

<2> DD Plc is expected to declare earnings per share of 1.60 next year. The company historically has reinvested 40 per cent of its earnings back into the business and earns a rate of return of 15 per cent on reinvested earnings. If investors demand a rate of return of 12 per cent on this stock, what is the current share price of DD Plc?

a. 1.60

b. 22.40

c. 2.67

d. 16.00

<3> As CFO of your corporation, you would prefer (all else equal) to see the price of your corporation's bonds

a. decrease, indicating that bond investors view your firm as more willing to take risks.

b. increase, indicating that bond investors view your firm as less risky.

c. decrease, indicating that bond investors view your firm as less risky.

d. increase, indicating that bond investors view your firm as more willing to take risks.