1. Which risk premium would have the smallest default premium component?

• A. the yield on commercial paper
• B. the yield on a three-month T-bill
• C. the yield on a 20-year corporate bond
• D. the APR on a car loan

2. The risk-free rate does not include the real rate of return.

True

False

3. A one-year Treasury instrument is issued at a quote of 98.90. Rounded to two decimal places as a percent, the yield is ___%

4. The common stock of Company A has a higher beta than the common stock of Company B. Which statement must be true?

• A. The price volatility of Company A common stock will be less than the price volatility of Company B common stock.
• B. Company B has a higher market cap than Company B.
• C. Company A has a higher stock price than Company B.
• D. The discount rate calculated by the CAPM for Company A will be higher than the discount rate calculated by the CAPM for Company B.