TRUE OR FALSE?

1. With a Regular IRA, investments are made using after-tax dollars but withdrawals once you retire are tax- free.

2. Your firm operates in a make-believe economy with no taxes, no costs of financial distress, no asymmetric information, etc. Furthermore, your firm currently has no debt in its capital structure. The weighted average cost of capital of your firm is likely to go down if you issue debt and buy back shares of stock.

3. The rule of thumb for diversification is that a portfolio composed of twenty well- chosen securities will usually achieve most of the benefits of diversification.

4. The yield-to-maturity of a bond will change over time as investors' expectations for inflation change. Specifically, if people think inflations will go up (down), the yield-to-maturity on existing bonds would go up (down) as well.

5. In contrast to Sole Proprietorships and Partnerships, Corporations are distinguished by a separation of who owns and who controls the entity.

6. With a defined benefit retirement plan, the employee is responsible for making contributions to the plan and selecting the manner in which those funds will be invested.

7. Forward contracts are traded on exchanges while futures contracts are not.

8. You have a long position in a European Call Options. This gives you the right but not the obligation to buy the underlying asset at the strike price on the date that the contract matures.

9. With the Liquidity Preference Hypothesis, the yield true should normally be upward sloping as investors require a maturity premium in order to entice them to invest in longer term securities.

10. If a firm paid a dividend on its common stock last year, it is legally obligated to pay a dividend this year too.