1.Which of the following statements is CORRECT?
If a coupon bond is selling at a premium, its current yield equals its yield to maturity.
If a bond’s yield to maturity exceeds its annual coupon, then the bond will trade at a premium.
If a coupon bond is selling at par, its current yield equals its yield to maturity.
If a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity.
If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
2.Operating leases help to shift the risk of obsolescence from the user to the lessor.
3.Because of improvements in forecasting techniques, estimating the cash flows associated with a project has become the easiest step in the capital budgeting process.
4.The “preferred” feature of preferred stock means that it normally will provide a higher expected return than will common stock.
5.If a firm’s goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders’ wealth.