The principle of risk-return tradeoff means that

	A	a rational investor will only take on higher risk if he expects a higher return.
	B	an investor who bought stock in a small corporation five years ago has more money than an investor who bought U.S. Treasury bonds five years ago.
	C	higher risk investments must earn higher returns.
	D	an investor who takes more risk will earn a higher return

A financial manager is considering two projects, A and B. A is expected to add $2 million to profits this year while B is expected to add $1.5 million to profits in each of next two years. Which of the following statements is most correct?

	A	The manager should select the project that maximizes long-term profits, not just one year of profits.
	B	The manager should select project A because more funds are received earlier.
	C	The manager should select the project that causes the stock price to increase the most, which could be A or B.
	D	The manager should select project B because it generates greater profits in two years.

You decide to borrow $250,000 to build a new home. The bank charges an interest rate of 8% compounded monthly. If you pay back the loan over 30 years, what will your monthly payments be (rounded to the nearest dollar)?

	A	$1,834
	B	$1,123
	C	$1,237
	D	$1,687