Reference no: EM132919842

Problem 1: Assume that all interest rates in the economy decline from 10 percent to 9 percent. Which of the following bonds will have the largest percentage increase in price?

a.A 10-year zero coupon bond

b.A 1-year bond with a 15 percent coupon.

c.A 10-year bond with a 10 percent coupon

d.An 8-year bond with a 9 percent coupon

Problem 2: Which of the following main Business objectives conflict and at the same time overlap?

a. Division of earnings and interest of customers

b. Interest of customers and welfare of the society

c. Profit maximisation and interest of customers

d. Fair dealing with customers and returns on earnings

Problem 3: The major disadvantage of commercial paper is:

a. The continued availability of funds is less certain than with bank financing

b. Firms must maintain an account balance equal to the paper outstanding

c. That there is no secondary market for commercial paper

d. Commercial paper is normally issued with a floating interest rate