Please answer Questions 1, 2, and 3.

Question 1

0 Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow at t = 0 followed by a series of positive cash flows.

	A.	To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost.
	B.	If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR.
	C.	A project's MIRR is always less than its regular IRR.
	D.	To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost.
	E.	A project's MIRR is always greater than its regular IRR.

Question 2

Stock X has a beta of 0.7 and Stock Y has a beta of 1.7. Which of the following statements must be true, according to the CAPM?

	A.	If the market risk premium declines, but the risk-free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y.
	B.	If you invest $50,000 in Stock X and $50,000 in Stock Y, your 2-stock portfolio would have a beta significantly lower than 1.0, provided the returns on the two stocks are not perfectly correlated.
	C.	If the expected rate of inflation increases but the market risk premium is unchanged, the required returns on the two stocks should increase by the same amount.
	D.	Stock Y's realized return during the coming year will be higher than Stock X's return.
	E.	Stock Y's return has a higher standard deviation than Stock X.

Question 3

Which of the following bonds has the greatest interest rate price risk?

	A.	A 10-year, $1,000 face value, zero coupon bond.
	B.	A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.
	C.	All 10-year bonds have the same price risk since they have the same maturity.
	D.	A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.