1. All else constant, an individual would be indifferent between receiving $2,000 today or receiving a $200 perpetuity when the discount rate is 10% annually.

True

False

2. The standard deviation of returns on Hendrick stock is 20% and on Burnbury stock it is 16%. The coefficient of correlation between the stocks is .75. The standard deviation of any portfolio combining the two stocks will be less than 20%

True

False

3. In a perfectly efficient market, all assets would plot on the Security Market Line.

True

False

4. When a bond's coupon rate is lower than the required rate of return, the bond

a. may sell at either a discount or a premium.

b. will sell at par value.

c. will sell at a discount from par.

d. will sell at a premium over par