1. Sally Simmons has been a client of Bill Bronson, a local broker, for years. Bill has offered to sell Sally a bond for $795. Bill believes the bond should yield 8%.
Always a wise investor, Sally heads home to think it over. She knows that the bond has twelve years left until maturity and pays an annual coupon rate of 5%. Using annual analysis, what does Sally conclude about this bond?
a. The bond is overvalued; she should not purchase it.
b. The bond is undervalued; she should not purchase it.
c. The bond is undervalued; she should purchase it.
d. The bond is overvalued; she should purchase it.
2. Drew enters into a contract to manage the operations of Ethel’s dental office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be
a. canceled.
b. breached.
c. altered.
d. performed.