Question 1 (6 marks each, total 30 marks)

Briefly explain with 1 sentence only (not more than 40 words) that whether you agree or disagree each of the following parts.

(a) Primary market involves trading of preferred stocks but not bonds.

(b) There is a positive relationship between the price of a derivative and the price of its underlying assets.

(c) There is no risk in trading government bills, but there is certainly a risk in trading stocks.

(d) The issuer of stock does not have an obligation to pay dividend when there is a loss though it needs to pay dividend when there is a positive net income. However, a coupon bond issuer must pay coupon even when it has a net loss (negative net income).

(e) No one would pay money to buy a call warrant if the price of the underlying asset (stock) is less than the strike price of the call warrant.