TRUE or FALSE by writing the word TRUE or FALSE on your answer sheet.

1 Financial risk is reflected in the variability in the returns a company may generate on

its assets and is mainly driven by the risks inherent in the industry that the company

operates in.

2. Introducing leverage into a firms capital structure may increase the expected returns

for shareholders but the impact on share price may still be uncertain.

3. Firms concerned with the sharemarket reaction to dividend announcements may adopt

a sticky dividend policy.

4. As a call option is an option to buy and a put option an option to sell, the opposite

position to buying an option to buy is buying an option to sell. Therefore, any factor

that increases the value of a call option will decrease the value of a put option written

on the same asset

and explain why

for all answer