1. The rate of return stockholders require on equity capital the firm raises by retaining earnings that otherwise could be distributed to common stockholders as divdends.
A. cost of perferred stock. B. Cost of retained earnings. C. cost of debt. D. stockholder's dividends.
2. Suppose that the one-year interest rate is 3.0 percent in the Italy, the spot exchange rate is $1.20/€, and the one-year forward exchange rate is $1.18/€. What must one-year interest rate be in the United States?
a) 1.2833%
b) 1.0128%
c) 4.75%
d) None of the above