Question 1 Indicate whether each of the following actions will increase or decrease a bond’s yield tomaturity: a. A bond’s price increase. b. The company’s bonds are downgraded by the rating agencies. c. A change in the bankruptcy code makes it more difficult for bondholders to receivepayments in the event a firm declares bankruptcy. d. The economy enters a recession. Question 2 .If a company’s beta were to double, would it expected return double? Question 3.Are there conditions under which a firm might be better off if it were to choose a machine with arapid payback rather than one with a larger NPV?

Question 1 Indicate whether each of the following actions will increase or decrease a bond’s yield tomaturity:

a. A bond’s price increase.

b. The company’s bonds are downgraded by the rating agencies.

c. A change in the bankruptcy code makes it more difficult for bondholders to receivepayments in the event a firm declares bankruptcy.

d. The economy enters a recession.

Question 2 .If a company’s beta were to double, would it expected return double?

Question 3.Are there conditions under which a firm might be better off if it were to choose a machine with arapid payback rather than one with a larger NPV?