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1. One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. 2. Sole proprietorships are subject to more regulations than corporations. 3. In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. 4. Sole proprietorships and partnerships generally have a tax advantage over many orporations, especially large ones. 5. Corporations of all types are subject to the corporate income tax. 2. In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash. 1. Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity. 2. In the statement of cash flows, a decrease in accounts payable is reported as a use of cash. 3. In the statement of cash flows, depreciation charges are reported as a use of cash. 4. In the statement of cash flows, a decrease in inventories is reported as a use of cash. 3. Other things held constant, if the expected inflation rate decreases and investors also become more risk averse, the Security Market Line would be affected as follows: 1. The y-axis intercept would decline, and the slope would increase. 2. The x-axis intercept would decline, and the slope would increase. 3. The y-axis intercept would increase, and the slope would decline. 4. The SML would be affected only if betas changed. 5. Both the y-axis intercept and the slope would increase, leading to higher required returns. 4. A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT? 1. The bond’s current yield is less than 8%. 2. If the yield to maturity remains at 8%, then the bond’s price will decline over the next year. 3. The bond’s coupon rate is less than

8%. 4. If the yield to maturity increases, then the bond’s price will increase. 5.If the yield to maturity remains at 8%, then the bond’s price will remain constant over the next year. 1. Farmers Bank offers to lend you $50,000 at a nominal rate of 5.0%, simple interest, with interest paid quarterly. Merchants Bank offers to lend you the $50,000, but it will charge 6.0%, simple interest, with interest paid at the end of the year. What’s the difference in the effective annual rates charged by the two banks? 2. Crockett Corporation’s five-year bonds yield 6.85%, and five-year T-bonds yield 4.75%. The real risk-free rate is r* = 2.80%, the default risk premium for Crockett’s bonds is DRP = 0.85% versus zero for T-bonds, the liquidity premium on Crockett’s bonds is LP = 1.25%, and the maturity risk premium for all bonds is found with the formula MRP = (t – 1) x 0.1%, where t = number of years to maturity. What is the inflation premium (IP) on five-year bonds? 3. How much would $5,000 due in 50 years be worth today if the discount rate was 7.5%? Please show the work of how you got the answer. 1. Large private organizational buyers and government agencies make large-volume or large-value purchases through __________, also known as reverse auctions. 2. Sealed bid construction contracts are examples of market games that are: simultaneous and non-repeated simulaneous and repeated sequential and non-repeated sequential and repeated 3. For the most part, adults find middle-age to be a….. time of reflection. negative experience of continued decline. time of unprecedented opportunity. time of increased sexual response. 4. New Technology, like the latest cell phones and HDTV, would probably be costed using the a) FIFO method of inventory costing b) moving-average method of inventory costing c) LIFO method of inventory costing d) specific-identification method of inventory costing