1. The default risk premium:

	compensates investors for interest rate risk, which is that long-term securities are more price sensitive to interest changes than short-term securities.
	is equal to expected inflation over the life of the security
	is added to the equilibrium interest rate on a security if the security cannot be converted to cash quickly at close to "fair market value."
	is the difference between the interest rate on a U.S. Treasury bond and a corporate bond of equal maturity and marketability

2. An example of a primary market transaction is:

	buying 100 shares of Wal-Mart stock from your uncle.
	buying 100 shares of IBM stock through the New York Stock Exchange via an online brokerage firm
	buying 100 shares of a new issue of Home Depot common stock

3. Net cash flow is generally defined as net income plus:

	retained earnings
	taxes paid
	interest paid
	depreciation and amortization