1. Which of the following statements is incorrect?

a. In making financing decisions, financial managers want to obtain capital at the lowest possible cost, which means that they need to understand how financial markets work and what financing alternatives are available.

b. Primary markets are like used-car markets in that they allow investors to buy or sell previously owned securities for cash.

c. Higher interest rates reduce business investment (or spending) because fewer capital projects can earn a high enough return on investment to cover the added interest cost.

d. Money markets are global markets where short-term debt instruments, which have maturities of less than one year, are traded.

e. All the answers are correct except one.

2. Which of the following statements is incorrect?

a. In a weak-form efficient market, it would be possible to earn abnormally high returns by looking for patterns in security prices.

b. The real rate of interest is not observable because all industrial economies operate with some degree of inflation.

c. Securities not listed on an exchange are bought and sold in the over-the-counter (OTC) market, and the OTC market differs from organized exchanges in that the OTC market has no central trading location.

d. Higher interest rates reduce business investment (or spending) because fewer capital projects can earn a high enough return on investment to cover the added interest cost.

e. All the answers are correct except one.