TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1) The key to the future behavior of a company lies in the sales growth and the net profit margin.

2) A company's estimated future earnings and its P/E ratio can be used to estimate the stock's future price.

3) A temporary decline in earnings per share usually results in a temporary reduction of dividends.

4) Risk is brought into the stock valuation process through the required rate of return.

5) Both beta and the expected return on the market portfolio incorporate risk into the Capital Asset Pricing Model.

6) The approach to stock valuation which holds that the value of a share of stock is a function of its future dividends is known as the dividend valuation model (DVM).

7) One advantage of the dividend valuation model is that it does not need a required rate of return.

8) The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.

9) If a company's revenues and earnings are highly predictable, it's stock price will also be highly predictable.

10) Over the period from late 2008 through 2012, the bond market outperformed the stock market.

11) When a bond is called, the bondholder generally faces a rate of return that is lower than expected.

12) Investment-grade bonds are more interest rate sensitive than junk bonds.