1. ___________ has features similar to both equity and debt. Like a bond, it promises to pay its holder a fixed amount of income each year

1. municipal bond

2. convertible bond

3. preferred stock

4. a and b of the above.

5. none of the above.

2. The risk-free rate and the expected market rate of return are 0.04 and 0.10, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to. Select one:

1. .112

2. 0.144

3. 0162

4. 0.132

5. 0.18