The required return of a 5-5/8% coupon, semi-annual payment bond changes from 5.5% to 5.75%.

• A.The bond is a premium bond before the change in required return and a discount bond after the change
• B.The bond is a discount bond before the change in required return and premium bond after the change
• C.The bond is a discount bond before the change in required return and a discount bond after the change

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Which of the following statements is (are) true with respect to the relation between a statistical decision and an economic decision?
I). Both methods of analysis should lead to the same conclusion.
II). Once the null hypothesis has been accepted using statistical methods, the analyst should not override that conclusion.
III When both a statistical analysis and an economic analysis support the same conclusion it would be very imprudent to reject
III). When both a statistical analysis and an economic analysis support the same conclusion, it would be very imprudent to reject that conclusion.
IV). If both methods of analysis lead to different conclusions, the proper course of action would be to run the statistical analysis again using a different confidence interval.

• A.I and II.
• B.III and IV.
• C.III.

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Consider two bonds, A and B.
They are both issued by the same corporate firm. They both have the
same maturity, seniority, and coupon. The only difference between the two bonds is that A is callable and
B is not. Which of the following most likely best describe the relationship between A and B

• A.Bond A will have a lower yield than bond B
• B.Bond B will have a lower price than bond A
• C.Bond A will have a higher yield than bond B

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You are trying to accumulate $5,000 in a savings account at the end of 4 years. The savings account pays 7% per year and you plan to make yearly deposits at the end of each year. How large must the deposits be?

• A.$1,337.50
• B.$1,126.14
• C.$1,250.00

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Which of the following statements is false?

• A.Depreciation is not a cash flow since it is not a cash expense for the firm.
• B.Depreciation is the largest but not the only non-cash expense.
• C.Interest payments should be included in the estimated cash flows because the effects of debt financing are reflected in the cost of capital.

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