1.A firm using a "restrictive" policy for total capital requirement will possibly be:

a)a long-term borrower.

b)a short-term lender.

c)a short-term borrower.

d)neither a borrower nor a lender.

e)a long-term lender.

2.A well-established corporation with a high credit rating needs to borrow money for the next three months. It will likely get the best interest rate by:

a)factoring its receivables.

b)issuing commercial papers.

c)obtaining a loan secured by its inventory.

d)getting an unsecured revolving line of credit.

3.What is the most critical reason why increases in long-term permanent assets should be financed with long-term debt?

a)Short-term interest rates are higher than long-term rates

b)Short-term debt may not be renewable at maturity

c)Long-term interest rates fluctuate more than short-term rates

d)None of the answers are correct.

e)Long-term interest rates can be accurately forecast but short-term rates cannot

4.If investors do not like dividends because of the extra taxes that they attract, how would you expect the stock price to behave on the ex-dividend date?

a)Fall by less than the amount of the dividend

b)Rise by more than the amount of the dividend

c)Not change because the relevant date is the date of record

d)Fall by more than the amount of the dividend

e)Fall by the amount of the dividend