1. Through its impact on cash rates, the Reserve Bank can affect rates further out on the maturity spectrum. What is usually the order of transmission when Reserve Bank increases the cash rate?

1) Cash rates; commercial bill yields; banks' deposit rates; banks' prime lending rates

2) Cash rates; commercial bill yields; banks' prime lending rates; banks' deposit rates

3) Cash rates; banks' deposit rates; commercial bill yields; banks' prime lending rates

4) Cash rates; banks' prime lending rates; commercial bill yields; banks' deposit rates

2. Which of the following criteria would be determinants of the appropriate ratio of debt to equity if a company should not take on more debt that can be serviced under conservative economic forecasts?

I. Maximisation of shareholder wealth

II. Industry norms

III. History of the ratio for the firm

IV. The stage of the current economic cycle

V. Limit imposed by lenders

Company's capacity to service debt

1) I, III, V, VI

2) II, III, V, VI

3) II, III, IV, V

4) III, IV, V, VI