1. The market risk premium is computed by:
a) adding the risk-free rate of return to the inflation rate.
b) adding the risk-free rate of return to the market rate of return.
c) subtracting the risk-free rate of return from the inflation rate.
d) subtracting the risk-free rate of return from the market rate of return.
e) multiplying the risk-free rate of return by a beta of one.
2. Which of the following statements about adjustments is not correct?
a) When making an adjustment to recognize supplies used in a period, total assets will not change.
b) Deferral adjustments are used to update amounts that have been previously deferred on the balance sheet.
c) Depreciation is an example of a deferral adjustment.
d) Accrued wages are wages owed, but not yet paid, to employees; the accrued wages will need to be recorded with an adjusting entry that increases expenses.