1. What is the principle problem in finance? (a) Making money for investors (b) Efficient allocation of capital to to a limited opportunity set (c) Creating stable prices, maximum employment, and moderate long-term interest rates (d) Preventing long-term financial crises at the cost of short-term development 2. Complete the following sentence with the correct items. (The) sets monetary and interest rate policy in the United States. If interest rates are set above the equilibrium rate, the supply of funds is than the demand for funds. (a) Federal Reserve; greater (b) Congress; less (c) Federal Reserve; less (d) Congress; greater 3. What is the impact of a increasing the following variables on a project's present value? An increase in future cash flows causes a(n) in a project's present value. An increase in discount rates causes a(n) in a project's present value. An causes a(n) in a increase in the time horizon when a cash flow is received causes a(n) project's present value. (a) decrease; increase; increase (b) increase; decrease; increase (c) increase; increase; decrease (d) increase; decrease; decrease 4. Complete the following expression. It is not possible for a company to default on its as this ownership represents a (a) debt or equity; residual claimant (b) debt; fixed payment (c) equity; residual claimant (d) equity; fixed payment