Corporations may either retain the residual earnings or


1. (TRUE or FALSE?) Corporations may either retain the residual earnings or return them in the form of common stock dividends.

2. (TRUE or FALSE?) Preferred stock is a perpetuity.

3. (TRUE or FALSE?) The CAPM solves for the rate of return that investors demand for holding a company’s common stock according to the degree of diversifiable risk present in the stock.

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Risk Management: Corporations may either retain the residual earnings or
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