1. If a bond's price is above its par value, its coupon rate will be

a. less than its yield-to-maturity.

b. greater than its yield-to-maturity.

c. less than its current yield.

d. equal to its yield-to-maturity

2. A high coupon bond is likely to be “called” by the issuing firm if

a. required yields rise.

b. it has a high call premium.

c. it has a low credit rating.

d. the going rate of interest on bonds decreases.

3. Consider a twenty-year bond with a 5% coupon that has a yield to maturity of 7%. If all else remains constant, one year from now the price of this bond will be

a. the same.

b. higher.

c. lower.

d. cannot be determined.

4. Suppose a company has a TIE ratio of 0.85. What might you conclude?

a. The company’s net income will likely be positive.

b. The company’s EBIT is larger than its interest expense.

c. The company does not have enough short-term assets to pay for its short-term liabilities coming due.

d. The company has overextended its usage of debt.

5. Which of the following statements regarding mutual funds is false?

a. All profits are dispensed to shareholders in the form of dividends.

b. Expenses associated with advertising and sales are called 12b-1 fees.

c. Profits earned from the sale of assets within the fund are forwarded to shareholders via ordinary income dividend distributions.

d. Most funds offer an option for automatic dividend reinvestment.