a) [10 marks] Evaluate each of the following statements (True or False).

i) One can enter into a legal agreement with a corporation but cannot sue the corporation.

ii) General Motors Corp. (GM) has existing bonds outstanding. These bonds are currently trading in the market. The company plans to issue a new bond next month. If a pension fund were allocated 100 shares of this new bond offering, it would be considered a secondary market transaction because GM issued other bonds in the past.

iii) When a sole proprietorship company fails to pay its debt obligations, its creditors cannot hold the owner of the company responsible for the defaulted debt. iv) If a firm receives a takeover bid and is offered a price per share that is higher than the current price of the firms shares, the manager should consider the offer to act in the best interest of the firms shareholders.

b) [10 marks] Complete the following statement (fill in the blanks). According to Fishers separation principle, a firms investment decision is (i)________ the owners consumption decisions because their consumption patterns, if necessary, can be rearranged through (ii)__________ .