1. Assume an investor thinks the stock market is about to undergo a sharp retreat. Under these conditions, the investor’s best course of action would be to
A) buy stock-index futures contracts.
B) short sell stock-index futures contracts.
C) use stock-index futures to sit out the market.
D) use a long hedge against the investor’s existing positions.
2. Motter, Inc. preferred stock pays an annual dividend of $1.80. The market is currently yielding 7.5% on similarly rated issues. What is the value of one share of this stock?
A) $13.50
B) $18.00
C) $24.00
D) $25.80