It is important for any firm to determine its appropriate target cash balance:

• A.because of the fluctuation in interest rates on marketable securities.
• B.because there is a trade-off between the benefit and cost of liquidity.
• C.since most firms follow flexible policies of working capital management.

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The more ambiguous the effect on price, the ______ the information becomes.
I). less material.
II). more material.
III). less "public".
IV). more "public".

• A.II and IV.
• B.I and III.
• C.I only.

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Natural monopoly exists when:

• A.one firm can supply the entire quantity demanded at lower cost than two or more firms.
• B.one firm can supply the entire quantity demanded at the same cost as two or more firms.
• C.the long-run average cost curve exhibits constant returns to scale.

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When should a rational financial manager pay a bill if 1) a discount is offered, 2) the discount has not yet expired, 3) the firm needs to borrow funds to take the discount, 4) the firm will have sufficient cash by the end of the net period, and 5) the best possible borrowing rate exceeds the cost of forgoing the discount?

• A.As soon as possible after the discount date so as to not upset the supplier.
• B.No sooner than six months so as to maximize the use of "free" trade credit financing.
• C.On the final due date.

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Mutual fund operating expenses:

• A.are typically less than 0.1% of the value of the fund
• B.generally do not exceed 1% of the value of the fund
• C.usually exceed 2% of the value of the fund

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