1. Which of the following is/are FALSE? I. A firm's leveraged beta will always be greater than its unleveraged beta. II. The larger the amount of debt in a firm's capital structure, the greater will be the firm's leveraged beta.

a. I only b. II only c. Both I and II d. Neither I nor II

2. Which of the following is/are TRUE? I. Historically, the yield curve (i.e., the term structure of interest rate) has generally been upward sloping, which indicates that long-term interest rates usually have been greater short-term interest rates. II. With the matching approach to meeting the financing needs of the firm, fixed and permanent current assets are financed with long-term debt and equity funds. III. The aggressive approach to the financing of a firm's current assets uses a relatively low proportion of short-term debt and a relatively high proportion of long-term debt. IV. The conservative approach to the financing of a firm's current assets uses a relatively high proportion of short-term debt and a relatively low proportion of long-term debt.

a. I and II b. I, III and IV c. III and IV d. All of the above

3. Which of the following is/are TRUE? I. When factoring accounts receivables, the factor is the negotiated accounts receivable account. II. Trade credit, which facilitates the purchase of supplies without immediate payment, is one of spontaneous short-term credit sources. III. For a discounted bank loan, the bank deducts the interest at the time loan is made, and thus the borrower does not receive the full loan amount. As a result, the annual financing cost of the loan is greater than the stated annual interest rate. IV. A line of credit is a formal agreement between a bank and it customer under which the bank is legally committed to making loans to the customer up to a predetermined credit limit specified.

a. I and II b. II and III c. II, III and IV d. All of the above e. None of the above

4. Which of the following is/are FALSE? I. The standard deviation of a portfolio of two or more securities is always equal to the weighted average of the standard deviation of each of the individual securities in the portfolio. II. A beta value of 2.0 for a security indicates the security has greater-than-average systematic risk, and, in this case, it indicates the security is twice as risky as market. III. A beta value of 0.5 for a security the security has below-average systematic risk, and, in this case, it indicates the security is half as risky as market.

a. I only b. II only c. III only d. II and III e. All of the above