1. Which of the following bonds would have the highest required rate of return assuming each bond has the same time to maturity?

a. An AA-rated non-callable bond

b. An AA-rated callable bond

c. A BB-rated non-callable bond

d. A BB-rated callable bond

2. Which of the following can cause an increase in the price of a bond selling at par?

a. An increase in the YTM.

b. A decrease in the YTM.

c. The passage of time.

d. Both A and C

e. Both B and C

3. If a bond's required return falls, what will happen to its price?

a. It will fall only if the bond sells at a premium.

b. It will remain the same.

c. It will rise.

d. It will fall.

4. Which of the following statements are true in regard to retained earnings?

A. Retained earnings will increase when a firm earns a positive net income.

B. Retained earnings will increase when a firm pays a dividend.

C. Both a and b are correct.

D. Neither a nor b are correct.