1.Which of the following is an example of an agency problem?

a.Managers engage in empire building.

b.Managers protect their jobs by avoiding risky projects.

c.Managers over consume luxuries such as corporate jets.

d.All of these options are examples of agency problems.

2.An investment adviser has decided to purchase gold, real estate, stocks, and bonds in equal amounts. This decision reflects which part of the investment process?

a.Asset allocation

b.Investment analysis

c.Portfolio analysis

d.Security selection

3.A municipal bond carries a coupon rate of 6.25% and is trading at par.What would be the equivalent taxable yield of this bond to a taxpayer in a 40% tax bracket?

4.An investor is in a 35% combined federal plus state tax bracket.If corporate bonds offer 8.50% yields, what must municipals offer for the investor to prefer them to corporate bonds?

5.A T-bill with face value $10,000 and 82 days to maturity is selling at a bank discount ask yield of 2.9%.What is the price of the bill?What is its bond equivalent yield?