1. If a stock’s beta is equal to one , then a. the stock’s expected rate of return would be equal to the risk- free rate. b. the stock’s expected rate of return would be equal to the expect ed rate of the market c. the stock’s expected rate would also equal one. d. the stock’s expected rate would equal zero. e. it is impossible for the stock’s beta to equal one.

2. There is a preferred stock which sells for par ($100.)

a) Compute the required rate, if the quarterly dividend is $2.

b) Explain the relationship of required rates and prices of preferred stocks.