Question 3 Which of the following statements is CORRECT? A. If expected inflation increases, interest rates are likely to increase. B. If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. C. If companies have fewer good investment opportunities, interest rates are likely to increase. D. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. E. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills. Question 4

Which of the following is a primary market transaction?

	A.	You sell 200 shares of Johnson & Johnson stock on the NYSE through your broker.
	B.	Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
	C.	You buy 200 shares of Johnson & Johnson stock from your younger brother. You just give him cash and he gives you the stock, the trade is not made through a broker.
	D.	One financial institution buys 200,000 shares of Johnson & Johnson stock from another institution. An investment banker arranges the transaction.
	E.	You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of Johnson & Johnson shares on the NYSE.