1. Which of the following statemnnts is COARECT? a. Because bankruptcy requires that corporate bondholders be paid in full before stockholders receive anything, bondholders penerally prefer to see corporate managers imvest in high risk/high return projects rather than low risk/low return projects. b. Since bondholders recelve fixed payments, they do not share in the gains if risky projects tum out to be highly succossful. However, they do share in the losses if risky projects fall and drive the firm into bankruptcy. Therefore, bondholders generally prefer to see corporate managers invest in low risk/low return projects rather than high risk/high return projects. c. One drawback of forming a corporation is that you lose the limited liability that you would otherwise receive as a proprietor. d. One advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership. 2. In order to maximize its shareholders' value, a firm's management must attempt to maximize the stock price in the long run, or the stock's "intrinsic value." a. True b. False 3. The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution) places an order to buy a stock. a. True b. False 4. If you wanted to know what rate of return stocks have provided in the past, you could exar data on the Dow Jones Industrial Index, the S\&P 500 Index, or the NASDAQ Index. a. True b. False