1. Which of the following assets can be considered as risk-free?

I. A 3-month Treasury bill issued by US Department of Treasury.

II. A 10-year Treasury bond issued by US Department of Treasury.

III. A 15-year municipal bond issued by the city of New York.

IV. A 15-year corporate bond issued by Apple Inc.

1. I only
2. I and II only
3. I, II, and III only
4. I, II, III, and IV

1. Which of the following statement is true for a corporate bond with significant default risk, regarding its promised YTM and expected YTM?

1. Its promised YTM is lower than its expected YTM
2. Its promised YTM is higher than its expected YTM
3. Its promised YTM is the same as its expected YTM
4. Not enough information to determine.

1. A firm that has an ROE of 12% is considering cutting its dividend payout. Shareholders required rate of return for its stock is 14%. Given this information, which of the following statements is (are) correct? I. All else equal, the firm's growth rate will increase after the payout cut. II. All else equal, the firm's stock price will go up after the payout cut. III. All else equal, the firm's P/E ratio will increase after the payout cut.

1. I only
2. I and II only
3. II and III only
4. I, II, and III

1. (2 points) The constant-growth dividend discount model (DDM) can be used only when the ________.

1. growth rate is less than or equal to the required rate of return
2. growth rate is greater than or equal to the required rate of return
3. growth rate is less than the required rate of return
4. growth rate is greater than the required rate of return