1. If the yield curve slope is flat, the liguidity premium thoory (atsuming a mild preference for shorter-term bonds) indicates that the market is predicting. a. a mild rise in short-term interest rates in the near future and a mild decline further out in the future b. constant short-term interest rates in the near future and further out in the future c. a mild decline in short-term interest rates in the near future and a contimuing mild decline further out in the future d. constant short-term interest rates in the near future and a mild decline further out in the future. 2- Which of the following is not an element of the growth model of stock valuation? a. The stock's most recent dividend paid b. The expected constant growth rate of dividends c. The required return on investments in equity d. The stock's expected future price 3. Which of the following are true for the current yield? a. The current yield is defined as the yearly coupon payment divided by the price of the security. b. The formula for the current yield is identical to the formula describing the yield to maturity for a discount bond. c. The current yield is always a poor approximation for the yield to maturity. d. All of the above are true. e. Only A and B of the above are true. 4. A firm will borrow long-term a. if the extra interest cost of borrowing long-term is less than the expected cost of rising interest. rates before it retires its debt. b. if the extra interest cost of borrowing short-term due to rising interest rates does not exceed the expected premium that is paid for borrowing long-term. c. if short-term interest rates are expected to decline during the term of the debt. d. if long-term interest rates are expected to decline during the term of the debt. 5- A downward sloping yield curve most likely indicates: a. The central bank has restricted short-term borrowing b. Markets expect short-term rates to fall c. A strong demand for short-dated assets d. Investors have become capital risk averse e. Low prices for long-dated bonds