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1. Which statement is false?
- A. A corporation is not required to pay a dividend to its common shareholders.
- B. Only financial institutions can provide financial intermediation.
- C. Shareholders can vote by proxy for members of the board of directors, but they are not required to vote that way.
- D. As a general rule, a lower beta indicates a less risky stock in a well-diversified portfolio.
2. The cost of equity is generally greater than the cost of debt because
- A. equity has the residual claim on cash flows of the corporation.
- B. interest paid on debt is tax deductible.
- C. both a. and b.
- D. neither a. nor b.
3. As the price of a T-bill falls, its yield falls, too.
4. Which is the correct statement?
- A. The greater the expected return, the greater the risk that must be taken.
- B. The greater the expected risk taken, the greater the return earned.
- C. The greater the return, the greater the risk that must be taken.
- D. The greater the expected risk taken, the greater the expected return given.
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