1. Which one of the following statements is TRUE?

   	a.	An agency problem occurs when an owner/manager sells stock to an outsider but continues to consume perquisites.
   	b.	A lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching.
   	c.	When lenders protect themselves from the risk of asset switching by raising the interest rate, the firm's WACC can decrease.
   	d.	A supplier substituting a lower-quality raw material without approval is an example of asset switching.
   	e.	Firms borrowing money have greater flexibility to use that money when there are debt covenants.