John owns a corporate bond with a coupon rate of 10% that matures in 10 years. If interest rates go down to 8%, then:

A) the value of John's bond will decrease

B) the value of John’s bond will increase.

C) the value of John's bond will remain the same

D) It is not possible to value this bond

Assume that a firm had such serious financial problems that it was about to be liquidated after a bankruptcy. All of the firm's assets are about to be sold in order to pay the following claims against the firm: bondholders, preferred stockholders, common stockholders, and federal income taxes. Of the claims mentioned, what priority would common stockholders have?

A) First

B) Second

C) Third

D) Fourth

The PDQ Company's common stock is expected to pay a $3.00 dividend in the coming year. If investors require a 16% return and the growth rate in dividends is expected to be 8%, what will the market price of the stock be?

A) $11.76

B) $37.50

C) $23.11

D) $22.22

When a company is “highly leveraged”, this means:

A) the company has excess cash balances

B) the only source of long-term funding that the company uses is common stock

C) the company has a high percentage of Long-Term Debt on its Balance Sheet

D) the company pays a high level of cash dividends to shareholders