True about downward sloping yield curve

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Reference no: EM132068557

1. Which of the following is most likely to be TRUE about a downward sloping yield curve?

It indicates that bond values are likely to fall in the future

It indicates that demand for long-term bonds is currently higher than demand for short-term bonds

It indicates that yields are currently relatively low

It indicates that inflation is likely to increase in the future

2. Mojo Mining has a bond outstanding that sells for $2,120 and matures in 18 years. The bond pays semiannual coupons and has a coupon rate of 6.66 percent. The par value is $2,000. If the company's tax rate is 40 percent, what is the aftertax cost of debt?

A. 3.96%

B. 6.24%

C. 5.82%

D. 3.66%

E. 3.45%

Reference no: EM132068557

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