1. If the cost of debt is less than the cost of equity, why doesn’t the firm’s cost of capital continues to decrease with the use of more and more debt? (Minimum 200 Words)
2. You have discovered that when the required rate of return on a bond you own fell by 0.5 percent from 8 percent to 7.5 percent, the fair present value rose from $940 to $960. What is the duration of this bond? Assume annual payments. ((Do not round intermediate calculations. Round your answer to 2 decimal place. (e.g., 32.12))
Duration of this bond years
3. Explain how to identify the sources and types of profitable investment opportunities. What makes an investment profitable?