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A company with a AAA bond rating will command a higher interest rate on its bonds than a company with a lesser BBB bond rating.

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True

False

According to the CAPM, for each unit of Beta an asset's required rate of return increases by the market's risk premium.

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True

False

An investor's required rate of return for a common stock can be estimated by summing the stock's dividend yield and annual growth rate, assuming the growth rate is constant over time.

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True

False

As the required rate of return of an investment decreases, the market price of the investment decreases.

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False

Because most preferred stocks are perpetuities, their value can be determined by dividing the annual dividend by an investor's required return.

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False

Beta is a measurement of the relationship between a security's returns and the general market's returns.

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True

False

Bond prices are inversely related to market interest rates.

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True

False

Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price.

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False

If a bond has a market value that is higher than its par value, then the required return on the bond must be less than the bond's coupon rate.

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True

False

If a bond sells for its par value, the coupon interest rate and yield to maturity are equal.

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True

False

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