Preferred stock ________. A) reflects residual ownership of a ...

[anjilletteb]

Preferred stock ________.
 
  A) reflects residual ownership of a company
  B) represents a preferential claim on dividends
  C) will be paid before the bondholders
  D) always has a legal and specific claim to a fixed amount (listed as a liability)

Question 2

A stock has a beta of 1.8. The expected market return is 10.5. The equilibrium return for the stock is 17.30. What is the risk-free rate according to the CAPM?
 
  A) 1
  B) 2
  C) 3
  D) 4
  E) 5

[CourtneyCNorton]

Answer to Question 1

Answer: B
Explanation: B) COMMON STOCK reflects residual ownership of a company. Preferred stock will be paid AFTER the bondholders. A BOND always has a legal and specific claim to a fixed amount (listed as a liability).

Answer to Question 2

B