Please help with the following 10 problems,

Question 1(3 points)

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Which of the following occurrences would increase the chances that a firm calls its outstanding callable bonds?

Question 1 options:

a)

The company's bonds are downgraded by Standard and Poor's.

b)

There is a significant increase in interest rates.

c)

There is a sharp decline in market interest rates.

d)

There is a significant deterioration in the firm's financial position.

Question 2(3 points)

A 10-year Treasury bond has a 12% annual coupon, the 15-year T-bond has an annual 8% coupon, the yield curve is flat, and all treasury securities have a 10% yield to maturity. Which of the following statements would be accurate?

Question 2 options:

a)

If interest rates decline, the prices of both bonds will increase with the 15-year bond having a larger percentage increase in price.

b)

If the yield to maturity for both bonds remains steady at 10% over the next year, the price of the 10-year bond would increase, but the price of the 15-year bond would fall.

c)

The 10-year bond would sell at a discount, while the 15-year bond would sell at a premium.

d)

The prices of both bonds will increase if interest rates decline with the 10-year bond having a larger percentage increase in price.

Question 3(3 points)

A company wants to issue new 20-year callable bonds that will be made callable after 5 years at a 5% call premium. How would this affect their required rate of return?

Question 3 options:

a)

The required rate of return would decline due to the call premium.

b)

Because the bond would be a less risky investment for a bondholder, the required rate of return would decline.

c)

There would be no expected change in the required rate of return.

d)

The required rate of return would increase due to increased risk for the bondholder.

Question 4(3 points)

A firm that issues new bonds normally sets the coupon rate equal to the required rate on bonds of equal risk.

Question 4 options:

a) Trueb) False

Question 5(3 points)

There is lower risk inherent in a portfolio if there is a high correlation between the stocks in a portfolio.

Question 5 options:

a) Trueb) False

Question 6(3 points)

Callable bonds can be redeemed after but not prior to maturity by the firm.

Question 6 options:

a) Trueb) False

Question 7(3 points)

The largest annual supply of external funds for business corporations comes from issuance of which one of the following sources?

Question 7 options:

a)

privately placed stocks

b)

bonds

c)

preferred stocks

d)

common stocks

Question 8(3 points)

Zero coupon bonds pay no interest and are offered at par value. These types of bonds allow investors to reap compensation through capital appreciation.

Question 8 options:

a) Trueb) False

Question 9(3 points)

The callable bond will be called if rates fall far enough below the coupon rate, but it will not be called otherwise.

Question 9 options:

a) Trueb) False

Question 10(3 points)

XYZ, Inc's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?

Question 10 options:

a)

$828.93

b)

$928.39

c)

$892.93

d)

$882.39