1. Suppose Riskfree rate (Rf) = 9%, Market return (Rm) = 14%, and beta = 1.3. The required rate of return of stock i is: 15.5%
Now suppose that Rf increased to 10%, and the slope of the SML remains constant. What is the market return Rm?
a) 13%
b) 14%
c) 15%
d) 16%
e) 17%
2. A company issued 500 shares of stock with a par value of $1/share at $20/share. Prepare the general journal entry.
DEBIT: Common Stock for $500 and Additional Paid in Capital for $9,500; CREDIT: Cash for $10,000
DEBIT: Cash for $10,000; CREDIT: Common Stock for $500 and Additional Paid in Capital for $9,500
DEBIT: Cash for $10,000; CREDIT: Common Stock for $9,500 and Additional Paid in Capital for $500
DEBIT: Cash for $10,000; CREDIT: Common Stock for $10,000