1. If a 10% government bond's yield changes from 9% to 11% what will be the effect on its price?
The bond will no longer sell at a premium but will instead trade at a discount.
The bond will no longer sell at a discount and will instead trade at a premium.
The bond will still sell at a premium but not so much as before.
Nothing will happen to the price of the bond as that is fixed at issue.
2. If the forecasted sales level is not met, which of the following will lead to a lower than expected addition to retained earnings?
A decrease in production facilities
An increase in fixed charges on external financing
Assets being turned over quickly
A significant increase in income
Inventories being built up quickly