1. Which statement is false?

• A. If a corporation cannot pay its debts, then the shareholders must pay them.
• B. You buy gas for your car at spot.
• C. A high P/E ratio generally indicates that a stock is riskier than if the P/E ratio were low.
• D. Ask Bid
• E. Stocks in the Dow 30 are all large-cap.

2. Which statement is correct?

• A. Open market operations are the most frequently used tool of monetary policy conducted by the Federal Reserve.
• B. The Federal Reserve Board of Governors has seven Governors plus a Chairman.
• C. The Federal Reserve Open Market Committee sets the discount rate and the Federal Funds rate.
• D. The Federal Reserve District Banks regulate all U.S. banks, and the Federal Reserve Board of Governors supervises all U.S. banks.

3. In order from smallest to largest:

• A. burn, acid, current
• B. burn, current, acid
• C. acid, current, burn
• D. current, acid, burn
• E. current, burn, acid

4.

r_f + _s[E(r_m) - r_f] is the...

• A. risk-free rate.
• B. expected market premium.
• C. capital asset pricing model.
• D. none of the above.