1.Reverse stock splits will __________

a.		Increase the total wealth of stockholders.
b.		Reduce retained earnings.
c.		Increase the number of shares to stockholders.
d.		Decrease the number of shares to stockholders.

2. If preferred stock pays a $5 annual dividend and sells for $100. The cost of preferred stock financing is _______ if we don't consider floatation costs:

a. 5%

b. 10%

c. 25%

d. 50%

3. Which of the following statements about portfolio is true? ______

A.The expected return of a portfolio is NOT the weighted average of the expected returns of all individual stocks in the portfolio.
B		The standard deviation of a portfolio is NOT the weighted average of the standard deviations of all individual stocks in the portfolio.
C.		Portfolio beta is NOT the weighted average of the beta values of all individual stocks in the portfolio.

4. A company's cost of capital is generally not equal to the weighted average of its investors' required returns when we consider floatation costs and taxes.

True or False

5. Reverse stock splits will __________

	a.	Increase the total wealth of stockholders.
	b.	Reduce retained earnings.
	c.	Increase the number of shares to stockholders.
	d.	Decrease the number of shares to stockholders.