1. The component cost of a firm's preferred stock consists of:
a. the current dividend yield.
b. the expected growth rate of dividends.
c. dividends expressed as a percent of par value.
d. a and b
2. Which of the following statements is false?
a. Beta is meaningful only if an investor holds a well-diversified portfolio.
b. You can completely eliminate risk if you hold a well-diversified portfolio.
c. A portfolio composed of only one stock will not be well diversified.
d. A wise investor diversifies to capture the high average return of stocks while avoiding as much risk as possible.
e. All of the above statements are correct.