The debt to equity ratio of a corporation X is 1.51. Assume now that corporation X operates in a non- perfect capital market. Which of the below statements is correct? *

The manager of firm X will adopt the optimal capital structure.

Two of the following answers are correct

The cost of bankruptcy is not zero.

The manager of firm X will not adopt the optimal capital structure.

Consider the following two income streams (1,2)=(5000, 2346) and a market interest rate of 10%. Assume that the optimal consumption bundle is (5300,2016), discuss how could this bundle be achieved. We conclude that *

The Present value of both income streams is 7132.72, the agent need to borrow 300 in the present time and repay it as 300 in the future.

The Present value of both income streams is 7346, the agent needs save 300 in the present time and consume 330 in the future.

The Present value of both income streams is 7132.72, the agent need to save 300 in the present time and consume 330 in the future.

The Present value of both income streams is 7132.72, the agent need to borrow 300 in the present time and repay it as 330 in the future.

Nagham is operating in a perfect capital market and has the following income stream (y_1, y_2) = (1500,770). Further assume that the market rate of interest is 10%. Naghams initial wealth (wealth at time 1) is *

770

1500

2200

2270