Imagine that the yield curve is currently flat. The Treasury announces that they will no longer issue securities with maturities longer than two years. As a result, long-term government bonds will be refinanced using only relatively short-term debt. If the "market segmentation theory" of the yield curve is correct, what will happen to the slope of the yield curve as a result of this policy change? Explain briefly.

Which of the following statements is correct? stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.