A. Compnay XYZ has issued preferred stocks that currently trade at $40 per share. If investors require 5% (annual) return on this investment, how much dividend does the compnay pay each quarter? (needles to say that dividends are paid quarterly.)

		$2.00
		$0.5
		$4.00
		$1.00

B. Which statement is correct?

		AAA bond has a lower yield than BBB bond becuase it has a lower default risk.
		AAA bond has a higher yield than BBB bond becuase it has a higher default risk.
		AAA bond has a higher yield than BBB bond becuase it has a lower default risk.
		AAA bond has a lower yield than BBB bond becuase it has a higher default risk.

C. Which one MAY change over the life of a bond?

		Par value
		Coupon rate
		Yield to maturity
		Maturity date

D. Which statement is correct?

		As an investment, bonds are typically riskier that stocks.
		Stocks mature but bonds may not mature.
		Stock holders have voting power but bond holders do not.
		Companies promise dividends to stock holders but do not promise coupons to bond holders.

E. Investment A has 10% expected return and 15% expected risk. Investment B has 20% expected return and 25% expected risk. Which one is a better invetment?

		Not enough information, it depends.
		Investment B becuase it has a higher return and at the same time higher risk.
		Investment A becuase it has a lower risk.
		Investment B because it has a higher return.

F. If stock x has a higehr beta than stock y, what can we say about the expected returns of x and y based on CAPM?

		E(Rx) = E(Ry)
		E(Rx) < E(Ry)
		Not enough information to decide.
		E(Rx) > E(Ry)