A. For each of the following four statements, indicate whether the given statement is true, false, or uncertain. You will need to provide an explanation for your choice for each statement. Each statement, if correctly answered, will be worth 2 marks. (i) "The price of a complex bond is always higher than the price of an equivalent simple bond." (ii) "Earning excess rate of return by using superior forecasting ability is not inconsistent with the semi-strong-form financial market efficiency." (iii) "A loan guarantee of $10 million to a corporation by a bank is recorded as an asset of $10 million in the balance sheet of the bank." (iv) If the systematic risk, measured by beta, of portfolios of two mutual funds is the same then those portfolios must be consisting of the same set of financial securities. B. Explain how a bank can reduce transaction costs, faced by a lender in direct finance, to a negligible level. (4 marks) C. Why a finance company faces the reinvestment rate risk? (2 marks)