1. Which of the following statements are true for annuity projects with positive net income and depreciable assets?

A. The cash flow breakeven point will be below the net income breakeven point.

B. The cash flow breakeven point will be above the net income breakeven point.

C. The NPV breakeven point will be below the cash flow breakeven point.

D. The NPV breakeven point will be above the cash flow breakeven point.

E. Both A and D are correct.

2. Which of the following is FALSE?

a. For ARMs, the longer the adjustment interval, the more interest rate risk the lender will take on

b. For ARMs, lenders and borrowers share the interest rate risk

c. Interest rates for ARMs are tied to market rates that are measured on a historical basis

d. ARMs shift all or part of the interest rate risk to the borrower, and the risk of default will generally increase to the lender