1. Given the same nominal rate, the higher the number of compounding per year, the lower the effective annual rate.

2. a. True b. False

The cost of new common stock (k_e) is greater than the cost of retained earnings (k_s) due to the flotation costs required to sell new common stock.

a. True b. False

3.

If a stock's expected rate of return is 20% and its standard deviation is 5%, its coefficient of variation would be 4.

	True
	False