1.

Which of the following is true?

	Corporate earnings sustain bonds when interest rates rise while stocks begin to drop almost immediately when interest rates rise.
	During significant portions of the business cycle stock and bond investments are going in the same direction.
	Stocks hit their peak and trough before bonds.
	Stocks and bonds are only going in the same direction near the top and the bottom of the business cycle.
	Bonds peak before stocks and hit the trough after stocks.

2.

Suppose the earnings projections for a firm are increased while the price to earnings ratio for the firm decreases simultaneously in the market. Which of the following is true regarding the effect of those changes upon the firm's stock price?

	The stock price will increase.
	The stock price could either increase or decrease.
	The stock price will stay the same.
	The stock price will decrease.