1. All else constant, which of the following statements is correct?

1. An increase in the market value of the common stock will increase the market-to-book ratio.

2. The market-to-book ratio is of most interest to the creditors of a firm.

3. A decrease in the price of the stock on the stock exchange will increase the market-to-book ratio.

4. The market-to-book ratio provides the selling price of a firms inventory.

2. Which of the following statements is correct?

1. A decrease in the exercise price will increase the value of a put.

2. A decrease in the exercise price will increase the value of a call.

3. A decrease in the underlying stock price will increase the value of a call option.

4. A decrease in the underlying stock price will decrease the value of a put option.

3. You are offered two different loans with identical terms, except the interest rates are different. Loan A has a rate of 6% compounded monthly and Loan B has a rate of 5.9% compounded weekly. Loan _____ is better because _____ .

1. A; the interest is compounded less frequently.

2. A; the effective annual rate is 6.07%.

3. B; the effective annual rate is 6.07%.

4. B; the annual percentage rate is lower.

4. Which one of the following statements is correct?

1. Retained earnings is classified as a long term asset.

2. Current liabilities can be converted into cash within twelve months.

3. A patent is an example of an intangible liability.

4. Assets equal liabilities plus shareholders equity.