True false 2. The profitability ratios reflect the net result of all of the financing policies and operating decisions. *

3. It might be possible to improve the ROE by using more debt, which in turn will lead to an increase in the P/E ratio and thus in the firm’s stock price *

4. The current real rate is the current interest rate minus the current (or latest past) inflation rate, while the real rate (without the word current) is the current interest rate minus the expected future inflation rate over the life of the security. *

5. Interest rate risk is the risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested. *