1.Returns on shares of Lattice are predicted as follows: Lattice earns 0.10 return in recession and 0.20 return in a boom. An economist attributes a 0.40 chance of a recession and a 0.60 chance of a boom. Which of the following is closest to lattices variance?

	A.	0.0056
	B.	0.0024
	C.	0.0034
	D.	0.0083

2.Which of the following effects will have the result of increasing the amount of financial leverage in the firm? In each case, assume that all other activity in the firm does not change.

	A.	A shift of $100 from long-term debt to short-term debt.
	B.	An increase in the firms retained earnings account.
	C.	A new equity issue.
	D.	A new debt issue. PLEASE ANSWER ALL QUESTIONS.