1. Explain the difference between primary and secondary markets and why secondary markets are so important to businesses that need to raise capital? Give examples from the real world?

2. Gruber Corp. pays a constant $8.15 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. The required return on this stock is 11 percent. What is the current share price?

3. Which statement is correct?

a) As more securities are added to a portfolio, total risk would be expeted to fall at an increasing rate.

b) The measure of risk for a security held in diversified portfolio is standard deviation.

c) Proper diversification can reduce or eliminate systematic risk.

d) Diversification reduces the portfolio's expected return because it reduces the portfolio's total risk.

e) All of these statement are false