1. Rank bonds, common stock, and preferred stock with regard to two factors the possibility of a substantial increase in value. Rank these same securities with regard to investors' legal claims for repayment on their investments.

2. Would a relatively high P/E ratio lead us to conclude that a stock is overvalued or undervalued? Why or why not?

3. Explain how a consumption tax could lead to a decrease in real interest rates.

4. List and discuss the various reasons that contributed to the financial crisis that occurred in 2008.