1. Other things being equal, which of the following is most likely to causes a common stocks price to decrease?

A)The company pays more dividends in the future.

B)A higher required rate of return.

C)A higher dividend growth rate.

2.

2. How would a corporate bonds price change if the Federal Reserve raises interest rates next week?

A)Increase.

B)Decrease.

C)Unchanged.

3. Investing in a companys bond is less risky than in the same companys common stock because _____________.

A)the stock has a higher par value than the bond.

B)the bonds future cash flows are more certain than the stocks.

C)the stock has voting rights.

the bond can be called back.

4. A bonds call provision allows the company to __________.

A)delay coupon payments

B)refinance at a lower coupon rate

C)buy back a portion of the debt issue

D)let bond bondholders vote

5. Can you use the constant growth stock equation to determine the price of a stock when its return, r_S, < its dividend growth rate, g?

A)Yes.

B)It depends on how large the dividend growth is.

C)No.