1. Which of the following statements is most consistent with MM Proposition I?

1 The firm should worry about the tax implications of debt financing.

2 The firm shouldn't use too little debt in their capital structure.

3 The firm shouldn't use too much debt in their capital structure.

4 It doesn't matter whether or not the firm uses debt in their capital structure.

2. Your best friend works in the finance office of the Delta Corporation. You are aware that this friend trades Delta stock based on information he overhears in the office. You know that this information is not known to the general public. Your friend continually laments the fact that he can't earn excess profits trading Delta stock. Based on this information, you would tend to argue that the financial markets are ________ form efficient.

weak

semiweak

semistrong

perfect

strong