1. Risk aversion is the behavior exhibited by managers who require ________.
A. an increase in return, for a given increase in risk
B. decrease in return, for a given increase in risk
C. an increase in return, for a given decrease in risk
D. no changes in return, for a given increase in risk
2. ________ is the process of evaluating and selecting long?term investments that are consistent with a firm's goal of maximizing owners' wealth.
A. Capital budgeting
B. Recapitalizing assets
C. Ratio analysis
D. Securitization
3. The possibility that the issuer of a bond will not pay the contractual interest or principal payments as scheduled is called default risk.
True
False
4. The claims of the equity holders on a firm's assets have priority over the claims of creditors because the equity holders are the owners of the firm.
True
False
5. A yield curve that reflects relatively similar borrowing costs for both short-term and long?term loans is called a normal yield curve.
True
False