1)You own a stock that pays a constant dividend of $2. The required rate of return on an investment in equity is 7%. As a rational investor, should you sell the stock if it was trading at $35 today?

A. Yes

B. No

C. Insufficient information to calculate and answer the question

D. Both B and C

2) Assume that the risk free rate is 6.5% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.6?

A. 10.4%

B. 1

C. 0.6

D. 6.5%

3) As a risk averse investor, which of the following rules would you use when choosing between two securities A and B?

A. Choose the one with the higher return when both A and B have the same risk

B. Choose the one with the lower risk when both A and B have same return

C. Use the CV to calculate the risk per unit of return when A and B have different risks and return

D. All of the above