5. The projected strength of the economy is rated on an equally weighted five point scale (20% weight each), and the expected returns for Wave Shredder Inc. are 3.5%, 5.096, 7%, 9.3% and 12% in the different states of the economy. If the standard deviation is 2.5%, how many of these returns fall within 1 standard deviation of the expected return? A. 1 B2 C.3 D.4 E.5 6. Preferred stock dividends are 1. a legal obligation 2. not a legal obligation 3. exempt from federal income taxation 4. not exempt from federal income taxation A. I and 3 B. I and 4 C. 2 and 3 D. 2 and 4 E. 2 only 7. Gary Harris Co. is expected to pay a dividend of DI = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 7.00% per year in the future. The company's stock currently sells for $37.59 per share the market risk premium is 6.75%, and the T-Bill (risk-free) rate is 4.00%. What is the company's current measure of beta? (Hint: First find r from the DGM, then use that in the CAPM to find Beta) A. 0.79 B. 0.94 C.1.00 D. 1.72 E. 2.30 8. Which of the following statements is CORRECT? A. The yield on a 3-year corporate bond should always exceed the yield on a 2-year corporate bond. B. The yield on a 2-year corporate bond should always be less than the yield on a 2-year Treasury bond. C. The yield on a 3-year Treasury bond should always exceed the yield on a 2-year Treasury bond. D. If inflation is expected to rise, then the yield on a 3-year bond should exceed that on a 2-year bond. E. The real risk-free rate should increase if people expect inflation to increase