problem1: The market allocates capital to companies based on;

[A] Expected returns.

[B] Risk.

[C] Efficiency.

[D] All of the above

problem2: The purpose of secondary trading is to;

[A] Provide jobs for brokers and dealers.

[B] Provide liquidity and competition between investments.

[C] Provide a market for securities not handled in primary trading.

[D] Provide lower commissions than on the organized exchanges.

problem3: The payback method has several disadvantages, among them;

[A] Payback fails to choose the optimum or most economic solution to a capital budgeting problem

[B] Payback ignores cash inflows after the payback period

[C] A &B

[D] None of the above

problem4: A higher interest rate [discount value] would;

[A] Reduce the price of common stock.

[B] Reduce the price of corporate bonds.

[C] Reduce the price of preferred stock.

[D] All of the above.

problem5:  The risk premium is likely to be highest for;

[A] United State government bonds

[B] Corporate bonds

[D] Gold mining expedition

[E] Either B or C