1)In the financial system

Select one:

a)Indirect finance refers to the issue of new securities in the primary market

b)Direct finance refers to the flow of funds from lenders to borrowers via an intermediary

c)Indirect finance refers to the flow of funds from lenders to borrowers via an intermediary

d)Direct finance refers to the buying and selling of securities in the secondary market

2)

2)Which of the following measures the degree to which the returns of two risky assets move together?

Select one:

a)Standard deviation

b)Variance

c)Beta

D)Covariance

3)

If a bond was paying a coupon of 5% and the yield of similar bonds in the market was 7% the bond would sell at:

Select one:

a)A discount

b)Par

c)A premium

D)None of the above

4)

In estimating "after-tax incremental free cash flows" for a project, you should include all of the following except:

Select one:

a)Changes in working capital

b)Sunk costs

c)Opportunity costs

d)Effects on inflation

5)

The after-tax cost of debt:

Select one:

a)will generally exceed the cost of equity if the relevant tax rate is zero

b)will generally equal the cost of preferred if the tax rate is zero

C)varies inversely to changes in market interest rates

d)has a greater effect on a firm's cost of capital when the debt-equity ratio increases