1. A negatively sloped yield curve suggests which of the following?

Short-term rates exceed long-term rates.

Long-term rates exceed short-term rates.

The Federal Reserve is following a tight monetary policy.

The Federal Reserve is following an easy monetary policy.

a. 1 and 3.

b. 1 and 4.

c. 2 and 3.

d. 2 and 4.

2. In general, firms favor issuing bonds instead of preferred stock because:

1. Debt is less risky to the firm.
2. Dividends are not tax deductible.
3. Effective cost of debt is cheaper.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

3. The price of a convertible bond is often which of the following?

1. Greater than its value as stock.
2. Less than its value as stock.
3. Greater than its value as debt.
4. Less than its value as debt.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.