1. Decisions made by individuals (assuming the individual is an entrepreneur) is (are)
   1. Portfolio selection
   2. Household finance
   3. Capital budgeting
   4. All of the above
2. A corporation X is operating in a non perfect capital market. The manager of corporation X wishes to maximize its market value and thus he hired an economic analyst to help him with this aspect. Corporation X adopts the following dividend policy: 10% of its profits are distributed as dividends while the rest are retained earnings. Finally, its equity to debt ratio is 2.03. *
   1. 33% equity and 77% debt
   2. 100% debt and 0% equity
   3. 0% debt and 100% equity
   4. None of the above
3. In a perfect capital market, consider the following two income streams (y1, y2) = (1500,1100) and (y*1, y*2)=(500,2200). Further assume that the market rate of interest is 10%. The present value of income stream (y*1,y*2) is
   1. 500
   2. 2500
   3. 2654.54
   4. 1100
4. Assume that the optimal consumption stream is (1600,990), discuss how could a rational consumer achieve this bundle if he currently has the income stream (y*1, y*2)=(500,2200).
   1. This agent is a lender
   2. This agent is a borrower
   3. This agent is neither a borrower nor a lender
   4. Such transactions are forbidden in a perfect capital market