1. If in the next year, the risk free rate remains the same, while the market risk premium falls, which of the following statements will be true?

a) Required return on all stocks will fall, but will fall more for stocks with higher betas.

b) Required return on all stocks will increase with a beta less than 1, and will decrease if beta is greater than 1.

c) Required return on all stocks will not be affected.

d) Required return on all stocks will fall equally.

2. A company can improve its debt-to-total assets ratio by:

a) shifting short-term debt to long-term

b) shifting long-term debt to short term.

c) sellilng common stock

d) borrowing more.

3. Financial accounting is focused on the ___________ financial statements of a company.

a) internal

b) external

c) middle

d) none of the above