1. Which of the following statement is incorrect?
a. Most of the answers are correct.
b. A firm’s capital is supplied by its creditors and owners.
c. We need to earn at least the required return to compensate our investors for the financing they have provided.
d. The yield to maturity is the discount rate that makes the present value of coupon and principal payments equal to the price of the bond.
e. A bond has a coupon rate of 6 percent and the bond makes semiannual coupon payments. The dollar amount of coupon interest received every six months is $60.
2. Which of the following statement is incorrect?
a. Tariffs are quantity restrictions imposed by Country A on certain goods imported from Country B.
b. Like any other market, the foreign exchange market is influenced by logical and illogical factors alike.
c. The risk that a multinational corporation faces due to fluctuating exchange rates can be managed by using forward contracts, futures contracts, and currency swaps.
d. Most of the answers are correct.
e. The General Agreement on Tariffs and Trade (GATT) is a treaty that provides for ongoing discussions among participating nations to find ways to minimize international trade barriers.
3. Which of the following statement is incorrect?
a. An example of a perpetuity is the dividends typically paid on a preferred stock issue.
b. Most of the answers are correct.
c. With an amortized loan, the equal amounts is paid off that include only the simple interest on the principal.
d. Annuities in which the cash flows occur at the beginning of each of the specified time periods are known as annuities due.
e. As the discount rate increases, the present value of a positive cash flow to be received at a particular time in the future gets closer to zero.