1. Which of the following statement is incorrect?

a. Most of the answers are correct.

b. Short-term securities, a maturity of one year or less, are traded in the money market.

c. The bonds issued by state and local governments are known as treasury bonds.

d. A banker’s acceptance is a short-term debt instrument that is guaranteed for payment by a commercial bank.

e. Investment banking firms help businesses and state and local governments sell their securities to the public.

2. Which of the following statement is correct?

a. All the answers are incorrect.

b. Business risk occurs when companies borrow money and incur interest charges that show up as fixed expenses on their income statements.

c. Standard deviation is a measure of non-diversifiable risk.

d. Financial risk arises primarily because of the fixed interest payments firms must make to their long-term creditors (debt capital).

e. Most investors enjoy risk taking whenever they can, even though they are never compensated for accepting risk.