3) Firm A is high-risk, and Firm B is low-risk. Everything else equal, which firm would you expect to have a higher P/E ratio?

a. Firm A b. Both would have the same P/E if they were in the same industry.

c. Firm B d. There is not necessarily any linkage between risk and P/E ratios.

6) A farmer sells futures contracts at a price of $2.75 per bushel. The spot price of corn is $2.55 at contract expiration. The farmer harvested 12,500 bushels of corn and sold futures contracts on 10,000 bushels of corn. Ignoring the transaction costs, how much did the farmer improve his cash flow by hedging sales with the futures contracts?

a. $2,000 b. $0 c. $33,875 d. $31,875

17) You want to earn a return of 11% on each of two stocks, A and B. Stock A is expected to pay a dividend of $3 in the upcoming year, while stock B is expected to pay a dividend of $2 in the upcoming year. The expected growth rate of dividends for both stocks is 4%. Using the constant-growth DDM, the intrinsic value of stock A _________.

a. will be less than the intrinsic value of stock B b. The answer cannot be determined from the information given.

c. will be higher than the intrinsic value of stock B d. will be the same as the intrinsic value of stock B

18) If a firm increases its plowback ratio, this will probably result in _______ P/E ratio.

a. The answer cannot be determined from the information given.

b. an unchanged c. a higher d.a lower

19) Today's futures markets are dominated by trading in _______ contracts.

a. commodity b. financial c. metals d. agriculture

11) Jand, Inc., currently pays a dividend of $1.58, which is expected to grow indefinitely at 4%. If the current value of Jands shares based on the constant-growth dividend discount model is $42.91, what is the required rate of return? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Rate of return

%