1. Which of the following statements is true?
Dividend payments of firms are independent of how much profit the firm is making
Stock prices of firms are independent of how much profit the firm is making
A share of stock gives an investor complete ownership of the corporation that issued the stock
A share of stock gives an investor partial ownership of the corporation that issued the stock
2. In the CAPM, a stock has a beta coefficient of 0.1. The average returns to all stocks in the market is 10%. If the interestrate on three-month T-bills is at around 2 percent, what is the expected return to this stock? Assume that unsystematicrisk is zero.
2.5 percent
5.0 percent
7.5 percent
10.0 percent