1. Business risk is the additional risk borne by the shareholders as a result of the firm's use of fixed income securities.

True

False

2. One implication of the tradeoff theories of capital structure decision is that firms that are likely to pay taxes at higher rates should carry more debt than firms in lower tax brackets.

True

False

3. ___________ are the markets for short-term debts.

		Capital markets
		Money markets
		Secondary markets
		Mortgage markets

4. A premium added to the equilibrium interest rate on a security if the security cannot be converted to cash on short notice is called ___________.

		interest rate risk premium
		liquidity premium
		maturity risk premium
		default risk premium