Problem
I) a) If interest rates rise after a bond issue, what will happen to the bond's price and yield to maturity (YTM)? Does the time to maturity affect the extent to which interest rate changes affect the bond's price? (use an example to answer this question.)
b) Why does the value of a share of stock depend on dividends?
II) Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule:
o Payback period
o Internal rate of return
o Profitability index
o Net present value.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.