1. Which of the following is the best definition of internal rate of return (IRR)?
a) The IRR is a capital budgeting method used by firms to decide whether they should make long-term investments. b) The IRR is a capital budgeting method used by firms to decide which discount rate would give the best revenue return. c) The IRR is a capital budgeting method used by firms to decide which discount rate would be needed to return a profitable project. d) The IRR is a capital budgeting method used by firms to identify, for a particular investment opportunity, the maximum discount rate that can be tolerated
2. Which of the following may be said to create a debt market environment, whereby one company may obtain a comparative interest rate advantage over another company in the fixed interest rate market, compared with the floating interest rate market?
A. The existence of market segmentation between the fixed and floating rate markets.
B. Typically, fixed-rate market risk premiums are based on external credit rating agency reports.
C. Professional institutional lenders, such as banks and merchant banks, apply their own internal credit risk premiums.
D. All of the given answers.