1. which one is true and false.
2. A general decline in prices also decreases the value of money. ( )
3. Treasury bond has maturity between 1 yr < t 10 years. ( )
4. Inventory is not part of the liquid assets because it is mostly physical in nature. ()
5. Retail businesses inventory includes goods in process and raw material. ( )
6. Capital structure refers to respective proportion of the two sources of fund on the

balance sheet.

1. Prime rate is conventionally more than 6% above fed funds rate.
2. When fed funds rate goes up, money supply goes up, too.
3. If the Federal Reserve sells more Treasury securities, overall interest rates go up. ()
4. If the Federal Reserve sells more Treasury securities, money supply goes up. ()
5. The Federal Reserve has the power to fix the min rate of interest that commercial banks may pay on savings account. ( )
6. Corporate bonds are riskier than US Treasury, so they pay default risk premium

over what Treasury pays to stay competitive in the market. ( ) 12. Accounting equation refers to the relations between line items on the balance

sheet, and can be summarized as Assets = (Liabilities + Equity) (Debt + Net

worth). ( )

Income statement represents the process to arrive at net profit through the firms

normal operation.

1. For most companies primary source of income is investment income.