1. What is the primary factor that determines the price of securities? Can you think of another factor that might significantly affect how investors value the first factor? (Think hard: this second factor isn't mentioned in the chapter.)
2. Companies are generally financed with a mix of debt and equity. How does the riskiness of the company as perceived by the financial market change as the mix shifts from all equity to mostly debt? Why? Would changes in per- ceived risk induced by changes in the debt-equity mix affect the company's stock price?