1. A stock had annual returns of 7.63 percent, 9.28 percent, -3.11 percent, and 15.09 percent for the past four years, respectively. What is the real average rate of return for this period if inflation averaged 2.3 percent?

4.15%

5.24%

4.81%

5.02%

5.36%

2. The use of leverage by a firm:

A. increases the variability of EBIT.

B. replaces all use of homemade leverage.

C. increases shareholder risk.

D. affects EBIT more than net income.

E. increases EPS at low levels of income.