Section 2: Multiple Choice (2 points each) Circle or Color in Red the answer that best completes the question, phase or formula 1 Project Runway has the following cash Flows Yr 0 ($10,000) Yr 1 $2,500 Yr 2 $4,500 Yr 3 $3,100 Yr 4 $5,200 Yr 5 $ 1,000 a b 1.225 yr 2.968 yr 3.000 yr 3.587 yr 4.002 yr d e 2 All other risk being equal, which of the following bonds would have the highest interest rate risk? a b d e low coupon bond of 100 years to maturity a high coupon bond of 100 years to maturity a low coupon bond of 10 years to maturity a high coupon bond of 10 years to maturity none of the above 3 Which of the following capital budgeting decision methods does NOT take into account time value of money and overall profit of the project(s)? a b d e NPV PI MIRR Payback all of the above take into account both of these items 4 Which of the following statements in trading corporate bonds is most accurate? a b d Like stocks, a trade order to sell will always be executed quickly and at price requested Like stock, a trade order to sell will always be executed quickly but you may not get price requested Like stock, a trade order to sell will not always be executed quickly but you will get price requested Unlike stock, a trade order to sell will not always be executed quickly nor at your price none of the above are true e 5 A "dirty" price on a bond includes a b accrued interest a risk premium bid-ask spread commission d