Quiz 7/8

Question 1

What reduces the required return on an investment

Answer 1

A decrease in the Treasury Bill and a decrease in Beta

Question 2

A beta coefficient for a stock of 0.8 implies

Answer 2

A return of 10% on the market will cause the return of the stock to be 8%

Question 3

T/F An aggressive investor will tend to prefer stocks with higher betas during rising markets

Answer 3

True

Question 4

t/f The risk premium in the CAPM rises with the expected return on the market

Answer 4

True

Question 5

t/f The larger the standard deviation of an investments return, the larger the investments risk

Answer 5

True

Question 6

t/f A beta of 2 indicates an asset’s return is more volatile than the market

Answer 6

True

Question 7

t/f The owners of a corporation elect the board of directors

Answer 7

True

Question 8

t/f Pre emptive rights mean that current stockholders have the right to maintain their proportionate ownership before new shares may be sold to the public

Answer 8

True

Question 9

t/f A 5% stock dividend reduces a firms total equity

Answer 9

False

Question 10

t/f A cash dividend reduces the firms assets

Answer 10

True

Question 11

t/f A constant payout ratio implies dividends vary with earnings

Answer 11

True

Question 12

t/f Once a firm has earnings, management has essentially two choices: distribute or retain

Answer 12

True

Question 13

t/f A stock dividend decreases retained earnings

Answer 13

True

Question 14

t/f Dividend reinvestment plans permit the stockholder to reinvest dividends if they are received

Answer 14

True

Question 15

t/f When a stock goes ex dividend, its price tends to decline by the amount of the cash dividend

Answer 15

True

Question 16

Which of the following is equity:
investments
Additional paid in capital
Retained earnings

Answer 16

Additional paid in capital

Retained earnings