Choose the one alternative that best completes the statement or answers the question. 1). Two companies operate in the same industry and tend to follow practically identical patterns of performance. Which statement describes the relationship between the returns of the two companies? (a) They show perfect negative correlation (b). They show imperfect correlation. (c). They are uncorrelated. (dThey show perfect positive correlation. 2). What is meant by the term "junk bond"? (a). It is a financial security issued by retail chains selling inexpensive items. (b). It is a financial instrument with predominantly debt characteristics but offering high rate and high risk, and sometimes offering an equity kicker. (e). It is a worthless bond. (a). It is a financial instrument with predominantly equity characteristics but offering high dividends and high risk, and sometimes offering a linked debt kicker. 3). Which of the following best describes what determines the cost of debt capital? (a). The cost to the firm of income less taxable profits th! The expected returns required by investors buying corporation bonds in competing companies (c). The current market rate of return for a risk class of debt (). The expected returns required by shareholders buying new shares in a firm 4). Which two terms correctly complete the following statement: "The NAV approach to valuation focuses on values, which may be adjusted to reflect values."? {a), balance sheet; current market (b) fixed asset; discounted values (e) fixed asset; future (d, balance sheet; discounted values