2. An "annuity due" will always have a higher present value than an otherwise equivalent "ordinary annuity. "This occurs because interest will compound for an additional time period on each annuity payment received with an "annuity due." 3. Compounding interest more frequently than once per year results in a lower effective interest rate because interest on interest is earned less frequently. 4. The price of money is represented by the dividend that is charged by the lender. 5. Short-term U.S. Treasury bills are considered to be the safest investment in terms of being risk-free. 6. An upward sloping yield curve is often a sign that the economy is weakening. 1 7. A "proxy statement" is a legal document that specifies the rights of the bondholders and the duties of the issuing corporation. 8. The conversion feature of convertible bonds allows bondholders to exchange their bonds for a specified denomination of commercial paper issued by the firm that issued the bonds. 9. Most corporate bonds are issued with a par or face value of $1,000. 10. Generally the higher a bond's rating (i.e., the closer to AAA the bond rating is), the more risky the bond is considered to be. 11. A bond's market value will approach its par value as the bond nears its maturity date. 12. A corporation's stockholders generally have voting rights that allow them to elect the firm's Board of Directors and to vote on other key issues presented for shareholder vote. 13. Unlike equity, debt capital is a permanent form of financing, as it has no maturity date and never has to be repaid by the firm. 14. Payment of common stock dividends is at the discretion of the corporation's Board of Directors. 15. Leverage results from the use of fixed-cost assets or funds to magnify returns to the firm's owners. 16. At the "operating breakeven point," the firm"s "Operating Profit" is equal in value to the firm's "Net Sales