1. The preemptive right is important to shareholders because it
a. allows managers to buy additional shares below the current market price.
b. protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.
c. protects the current shareholders against a dilution of their ownership interests.
d. is included in every corporate charter.
2. Assume the risk-free is 2 percent, the required return on the market is 13 percent, and Stock J's beta is 1.80. If expected inflation decreases by 0.75 percentage point, and investors' risk aversion increases by 3 percentage points, what would investors now require as a return on Stock J.
a. 26.45 percent.
b. 25.55 percent.
c. 24.65 percent.
d. 22.85 percent.