#1 The cost of equity is generally greater than the cost of debt because

• A. equity has the prior claim on cash flows of the corporation.
• B. interest paid on debt is tax deductible.
• C. both a. and b.
• D. neither a. nor b.

#2 As the price of a T-bill rises, its yield falls.

• A. True
• B. False

#3 Which is the correct statement?

• A. The greater the expected risk taken, the greater the return earned.
• B. The greater the return, the greater the risk that must be taken.
• C. The greater the expected risk taken, the greater the expected return given.
• D. The greater the expected return, the greater the risk that must be taken.