Choose the most suitable answer.

1. Geo Ltd. now is preparing a bond offering with an 8% coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value. Which of the following statements are correct?

I. Each interest payment per bond will be $80.

II. The yield to maturity when the bonds are first issued is 8%.

A.I only B. II only

C. I and II D. Neither

2. It is a measure of the systematic risk of a security or a portfolio in comparison to the market as a whole.

A. Expected return

B. Standard deviation

C. Coefficient of variation

D. Beta

3. The __________ describes the relationship between an individual security's returns and its market risk. The slope of this line is __________.

A. security market line; beta

B. security market line; market risk premium

C. characteristic line; beta

D. characteristic line; market risk premium

4. Which of the following techniques may not consider all cash flows of a project?

A. Payback period

B. Internal rate of return

C. Profitability Index

D. Net present value

5. Which of the following does not affect a firm's business risk?

A. Demand variability.

B. Sales price variability.

C. The extent to which operating costs are fixed.

D. Changes in required returns due to financing decisions.