Question 31 A European option and an American option are the same, the only difference is where they are traded. True False Question 32 If you are in the 40% marginal tax bracket, your after tax return is higher with a 3% municipal bond than a 4.5% corporate bond. True False 3 Question 33 10 points A firm's earnings per share increased from $10 to $12, its dividends increased from $4 to $4.40, and its share price increased from $80 to $ 100. Given this information, it follows that The stock experienced a drop in its P/E ratio the required rate of return increased the company had a decrease in its dividend payout ratio both earnings and share price increased by 20% Question 34 Which of the following best describes the purpose of derivative markets? Transferring risk from one party to another. Earning interest income Speculation Investing for short term and low return. 10 points Question 35 If a portfolio has the following characteristics; risk free rate = 2%, expected market return = 5% and a beta coefficient = 1.1 then the expected return on the portfolio = 6.3% True False Questic Question 36 A convertible bond can be converted into 25 shares of common stock and if the price of the common stock is $30, then the investor should not convert at this time. True False