1.Which of the following terms is INCORRECT?

Operating profit is another term for EBIT

Revenue is another term for Net Income

Return is another term for Net Income

Common Equity is another term for Book Value

YTM on a bond is another term for Cost of Debt

2.A retailer buys merchandise on credit to stock up on inventory in anticipation of higher holiday sales. What is the impact on current assets and current ratio at the time the inventory is purchased? Assume the current ratio is 2 before the purchase.

Current assets increase and current ratio decreases

Current assets increase and current ratio increases

Current assets increase and current ratio stays the same

Current assets decrease and current ratio increases

Current assets stay the same and current ratio decreases

3.Which of the following statements about treasuries and market interest rates is INCORRECT?

Lower interest rates make it LESS expensive for people to borrow money for all kinds of purchases: cars, houses and credit cards.

10-year corporate bonds typically have higher yields than 10-year treasury notes, because it is riskier to invest in corporate bonds.

In the years between 2008 through 2018, there was a larger spread (difference) in the yields on T-bills, T-notes, and T-bonds than now.

In addition to treasury bonds, municipal bonds are also considered risk-free because local governments cannot go bankrupt.

When market interest rates decrease, the prices of existing bonds increase.

4.Which of the following statements about the stock market is INCORRECT?

Investing in an index fund based on the S&P 500 is riskier than investing in a few stocks in the same industry

The U.S. stock market is impacted by tariffs, interest rates, and global events, such as the pandemic

Investing in a companys stock is riskier than investing in its bonds

The Standard & Poors 500 is a stock index of the 500 largest publicly traded companies in the U.S.

The Dow Jones Industrial Average is a stock index of 30 large publicly traded companies in the U.S., and in November 2020 the index went over 30,000 - a new high