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Material allowed: notes and laptop computer. Show as many calculations as possible Time: about three...

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Accounting

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Material allowed: notes and laptop computer. Show as many calculations as possible Time: about three hours. [11 True or False? (30 points) (1) The cost of debt of a company is defined at the rate of return required by the investors who lend money to that company. (2) The bank Morgan Jones believes that its current investment opportunities return 5% less than the rate of return shareholders could earn on their own by buying financial assets with comparable risk. Therefore, Morgan Jones should not undertake these investment opportunities. (3) The yield-to-maturity of a bond is the discount rate at which the present value of the payments equals the price of the bond (4) To avoid a currency mismatch between its debt and its assets, a company should borrow for the same number of years than the investment project is expected to last. (5) When discount rates go down, the price of a bond decreases. www.euruni.edu

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