1. An independent outside director:

A. is defined as a company employee who has no management responsibilities outside of the board.

B. cannot serve as the board chairman.

C. is prohibited from owning shares of the firm.

D. can be a shareholder as long as he/she holds no management position in the firm outside of the board.

2. With respect to bonds, when interest rates increase typically:

A. the coupon rate on existing bonds also increases.

B. the coupon rate on existing bonds remains unchanged.

C. bond prices also increase.

D. bond prices remain constant.

3. Which one of the following statements is correct?

A. A convertible bondholder is forced to convert no later than a pre-specified time.

B. The convertible option on a bond gives the owner the right to buy shares from a company at a pre-determined cash price.

C. The owner of a warrant has an option to convert the warrant into convertible bonds.

D. The owner of a warrant option will benefit if the firm's stock does well.

4. Warrants:

A. allow their holder to purchase shares at the current market price.

B. have a guaranteed maturity value.

C. grant the option to purchase either stocks or bonds at the holders discretion.

D. have an expiration date.