problem1. Which statement is exact?

A. Given a change in market interest rate, bonds with the high coupon rates have greater price change than bonds with the low coupon rates.

B. The total value of bond is equal to interest payments plus the present value of face amount.

C. Given a change in the market interest rate, longer term bonds have a greater price change than shorter term bonds.

D. A bond that is selling at discount has yield to maturity lower than coupon rate.

problem2. Kramerica Industries has bonds with the face value of $1,000 on market making semi-annual payments, with 10 years to maturity, and selling for $1,223.47. At this price, the bonds yield 6%. What is coupon rate on the Kramerica's bonds?

A. 8 %

B. 7%

C. 9%

D. 6%

problem3. Which one of the following is right concerning the rules related to project analysis?

A. The average accounting return computed as a percentage of the sales made by a project is the primary technique in analyzing independent projects.

B. The discounted payback period is biased towards long-term projects while payback period is biased towards short-term projects.

C. The net present value is less useful than the profitability index if comparing mutually exclusive project.

D. A project with investing type cash flows is adequate if its internal rate of return exceeds the required return.

problem4. Macrogates Industries bond has 10% coupon rate and $1,000 face value. Interest is paid yearly, and the bond has 20 years to the maturity. If investors need a 10% yield, what is the bond's value?

A. $813

B. $1123

C. $1,000

D. $849

problem5. Which of the following statements is right?

A. The cash flows of a new project that result from a lessening in cash flows from a firm's existing projects are called spill over effect.

B. The most valuable alternative that is forfeited when particular investment is undertaken is called a marginal cost.

C. A pro forma financial statement is financial statement which expresses all values as a percentage of either total assets or total sales.

D. The change in firm's future cash flows resulting from adding new project is referred to as residual cash flows.