1. Which of the following best describes a firm's external funding requirement?
a. Growth in assets minus net income
b. Growth in assets minus growth in current liabilities minus net income
c. Growth in assets minus growth in liabilities minus net income
d. Growth in assets minus growth in current liabilities minus the year's retained earnings
e. Growth in assets minus the current year's retained earnings
2. Which one of the following statements is correct?
a) The risk-free rate represents the change in purchasing power.
b) Any return greater than the inflation rate represents the risk premium.
c) Historical real rates of return must be positive.
d) Nominal rates exceed real rates by the amount of the risk-free rate.
e) The real rate must be less than the nominal rate given a positive rate of inflation