#1: T/F: The slope of the security market line is the market rate.

#2: T/F: A yield curve plots interest rates relative to the maturities of bonds.

#3: T/F: For a company, a major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.

#4: T/F: All else equal, long-term bonds have higher reinvestment risk than short term bonds.

#5: T/F: One of the disadvantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.

#6: T/F: The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares issued by the firm. This right helps protect current stockholders against both dilution of control and dilution of value.

#7: T/F: All else equal, high-coupon bonds have higher reinvestment risk than low-coupon bonds.

#8: T/F: If the coupon rate is higher than yield of a bond, this bond is sold at a premium.

#9: T/F: Companies can issue different classes of common stock. Some class or classes of common stock are entitled to more votes per share than other classes.

#10: T/F: Portfolio A has but one stock, while portfolio B consists of all stocks that trade in the market, each held in proportion to its market value. Because of its diversification, Portfolio B will by definition be risk less.

#11: Shelley won a lottery and will receive $1,000 a year for the next ten years. The value of her winnings today discounted at her discount rate is called which one of the following:

1. Simple amount
2. Present value
3. Single amount
4. Future value

#12: Mary just purchased a bond which pays $60 a year in interest and $1,000 when the bond matures after 10 years. What is this $60 called?

1. Call premium
2. Coupon
3. Face value
4. Discount

#13: Tom owns five different bonds valued at $66,000 and twelve different stocks valued at $82,500 total. Which one of the following terms most applies to his investments?

1. Portfolio
2. Grouping
3. Collection
4. Index

#14: The primary purpose of portfolio diversification is to:

1. Eliminate systematic risk
2. Increase returns and risks.
3. Eliminate firm-specific risks.
4. Eliminate all risks.

#15: The cash distributions by a corporation to shareholders is called:

1. Dividends
2. Net income
3. Capital gains
4. Retained earnings

#16: A bond that can be paid off early by the issuing company is referred to as being which one of the following?

1. Zero coupon
2. Callable
3. Collateralized
4. Senior

#17: The part of total risk that is irrelevant to a well-diversified investor is called:

1. Diversifiable risk
2. Market risk
3. Systematic risk
4. Beta risk

#18: Which one of the following is the y-intercept of the security market line?

1. Beta coefficient
2. Risk-free interest rate
3. Market risk premium
4. Market standard deviation

#19: FIN stock has a beta of 1.5. The risk-free rate of return is 2.5% and the market risk premium is 7.3%. What is the expected rate of return on this stock?

1. 12.53%
2. 9.70%
3. 13.45%
4. 8.58%

#20: FINs bonds have a 7.60% coupon and pay interest annually. The bonds mature in 20 years. The face value is $1,000. If the current market price is $1,062.50 per bond, what is the bonds yield to maturity?

1. 7.01%
2. 7.71%
3. 6.94%
4. 7.46%

#21:

What is the risk as measured in standard deviation of returns on a stock given the following information:

STATE OF ECONOMY	PROBABILITY OF OCCURRENCE	RETURN IF STATE OCCURS
Boom	30%	28%
Normal	60%	8%
Recession	10%	-15%

1. 11.65%
2. 12.62%
3. 12.78%
4. 11.77%

#22:

You have a chance to buy an annuity that pays $500 at the end of each year for 3 years. You could earn 4% on your money in other investments with equal risk. What is the most you should pay for the annuity?

1. $1243.75
2. $1387.55
3. $1212.84
4. $1415.48

#23:

What should be the share price of FIN inc. stock if the company just paid a $0.80 annual dividend, the dividends increase by 1.6% annually, and you require 8% rate of return.

1. $12.70
2. $19.52
3. $13.84
4. $16.68

#24:

You now have $500. How much would you have after 5 years if you leave it invested at 3.5% with annual compounding?

1. $593.84
2. 581.09
3. 689.42
4. 654.95

#25:

FIN inc. just paid a $2.80 annual dividend on its common stock. This dividend increases at an average rate of 4% per year. The stock is currently selling for $26.91 a share. What is the market rate of return?

1. 15.20%
2. 14.60
3. 13.88
4. 14.82

PLEASE help with calculations and formulas where/if possible. Thank you very much.