1) In a limited partnership at least one general partner must exist; that general partner
has unlimited liability.
2) The minimum denomination of U.S. Treasury bills is $100,000.
3) If the demand for a new bond issue increases, it is likely that the coupon rate will be
adjusted upward by the issuing company.
4) Argentina experienced a period of extremely high inflation relative to its trading
partners and Argentina’s currency decreased in value. This is an example of purchasing
power parity theory.
5) A compound annuity involves depositing or investing a single sum of money and
allowing it to compound for a certain number of years.
6) Inventories are considered fixed assets because inventory levels remain fairly
constant throughout the year.
7) Other things equal, in imperfect markets a firm that maintains a stable dividend will
have a lower required rate of return on its equity.
8) Generally, the least important motive for holding liquid assets for a typical company
is the speculative motive.
9) Changes in capital spending are not incorporated directly into capital budgeting
problems because the amounts are included in the operating cash flows through the
inclusion of depreciation expense.
10) A project with a payback period of four years is acceptable as long as the company’s
target payback period is greater than or equal to four years.
11) The EOQ model calculates the size of the firm’s inventory given its expected usage,
carrying costs, and ordering costs.
12) Financial risk applies to both the additional variability in earnings available to
common shareholders and the additional chance of insolvency caused by the use of
financial leverage.
13) The size disparity problem occurs when mutually exclusive projects of unequal size
are being examined.
14) As the required rate of return of an investment decreases, the market price of the
investment decreases.