The following tables shows the prices of a sample of


1. The following tables shows the prices of a sample of treasury strips. Each strip makes a single payment at maturity.

Years to maturity Price, (% of face value)

1 98.352%

2 94.851

3 91.044

4 86.980

a. What is the 1-year interest rate?

b. What is the 2-year interest rate?

c. What is the 3-year interest rate?

d. What is the 4-year interest rate?

2. Conservatively leveraged Firm A and highly leveraged Firm B operate at the same level of earnings before interest and taxes. Which firm has a higher change in volume?

A. Firm A

B. Firm B

C. The change in volume does not affect the amount of leverage.

D. There is not enough information to answer the question.

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Financial Management: The following tables shows the prices of a sample of
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