1. Which of the following statements is incorrect?

a. The annual percentage rate (APR) is the interest rate actually paid (or earned) after accounting for compounding.

b. In today's financial markets, the best example of a perpetuity is the preferred stock issued by firms.

c. The discounting factor is the reciprocal of compounding factor.

d. Each cash flow is discounted at a same rate when calculating the present values of multiple cash flows.

e. All the answers are correct except one.

2. Which of the following statements is correct?

a. A sole proprietorship is a business that is owned by stockholders.

b. The decision-making process for the firm to purchase productive assets, long-term assets, is called working capital management.

c. A key disadvantage of a general partnership is that all partners have unlimited liability.

d. Productive assets, which are short term in nature, are financed by short-term borrowing.

e. All the answers are correct.