1. All else equal a rational investor would prefer:
a. A stock with a mean of 15% and a standard deviation of 20%.
b. A bond with a mean of 5% and a standard deviation of 10%.
c. A stock with a mean of 15% and a standard deviation of 15%.
d. A bond with a mean of 8% and a standard deviation of 10%.
2. Which statement is TRUE?
a. Cash is one of the 5 Cs of credit.
b. Lockboxes are often used when firms have customers over a large geographic area
c. Paying accounts payable early to take advantage of discounts results in a shorter cash conversion cycle.
d. Under a line of credit, the bank is legally committed to lend the funds