1) One problem with using negative values for the proportion invested in the risk less asset to represent a borrowed amount is that the implied borrowing rate of interest is the same as the __________.
A. prime rate of interest 
B. current rate of interest 
C. lending rate of interest 
D. nominal rate of interest 

2) If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in
A. high beta stocks 
B. low beta stocks 
C. stocks with large amounts of unique risk 
D. stocks that plot below the security market line 

3) Stony Products has an inventory conversion period (ICP) of about 70 days. The receivables collection period (RCP) is 30 days. The payables deferral period (PDP) is about 40 days. What is Stony's cash conversion cycle (CCC)?
A. 100 days 
B. 60 days 
C. 140 days 
D. 70 days 

4) The main source of short-term operating capital is _________.
A. trade credit 
B. bank loans 
C. bonds 
D. sale of treasury stock 

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