1.

A corporation seeking to buy its securities that already issued would most likely

A.	conduct an IPO with the assistance of an investment banker.
B.	engage in a secondary market buy of equity.
C.	conduct a private placement to a large number of potential buyers.
D.	place an ad in the Wall Street Journal soliciting retail suppliers of funds.
E.	none of the options.

2.

The most illiquid of the following market securities are

A.	commercial paper.
B.	banker's acceptances.
C. T-bills
D.	Fed funds.
E.	Firms stock.

3. An investor is in the 28 percent federal tax bracket and pays a 11 percent state tax rate and 4 percent in local income taxes. For this investor a municipal bond paying 6 percent interest is equivalent to a corporate bond paying _____ interest.

A.	11.79 percent
B.	10.17 percent
C.	9.08 percent
D.	9.68 percent
E.	8.96 percent

4. A corporate customer obtains a $1.5 million loan from a bank. The customer agrees to pay a 6.25 percent interest rate and agrees to make compensating balances of 7 percent of the loan amount. These will be held in noninterest-bearing transactions deposits at the bank for one year. The bank charges a 1 percent loan origination fee on the amount borrowed. Reserve requirements are 10 percent. What is the expected rate of return to the bank (k) (to the nearest basispoint)?

A.	5.95 percent
B.	7.52 percent
C.	7.99 percent
D.	8.01 percent
E.	7.73 percent

5. An increasingly positive financing gap can indicate ________________ liquidity risk because it may indicate _______________ deposits and/or rising loan commitments.

A. increasing; increasing

B. decreasing; decreasing

C. increasing; decreasing

D. decreasing; increasing