Which of the following is true?

A. The bond holders are paid more than the equity holders when a company defaults.

B. Municipal bonds are also safe assets as the treasury bonds because they are also issued by the government.

C. Investors can perfectly hedge the credit risks in corporate bonds by purchasing credit default swaps.

D. Corporate bonds only have credit risk, but are not subject to interest rate risk.

E. A risky bond is more expensive if its credit spread increases.

Which of the following is true?

A. The stock of company is less valuable than its debt because debt holders have higher priority to company

assets than equity holders.

B. It is possible for an investor to receive 30% of a company's payout but control 60% of the votes.

C. Since the trading of the stocks in the secondary market does not generate cash flows for the firm, managers

shouldn't care about share prices at all after IPO.

D. Just like interest rate can be slightly negative, stock price can also be temporarily negative.

E. None of the above.

If Company A has positive PVGO and Company B has negative PVGO, which of the following is NOT

true?

A. A is a growth company, B is not.

B. The ROE of A and B can both be positive.

C. The plowback ratios of A and B are both positive

D. The growth rate of Company A (gA) must be higher than the growth rate of Company B (gB).

E. Company A can have a lower valuation than Company B.

Which of the following is true:

A. One can reduce the risk of a portfolio to zero as long as there are enough assets to be added to the

portfolio.

B. All else equal, the volatility of a portfolio is the lowest when the assets are uncorrelated.

C. All the portfolios are perfectly correlated along the line (excluding the risk-free asset) connecting the

risk-free asset and the tangent portfolio.

D. One cannot construct a portfolio with higher expected return than the tangent portfolio.

E. A portfolio consisting of only risky assets must have an expected return higher than the risk-free rate.