a) In a reverse stock split:

Select one:

1. the number of shares outstanding increases and owners' equity decreases.

2. the number of shares outstanding decreases but owners' equity is unchanged.

3. shareholders make a cash payment to the firm.

4. the firm buys back existing shares of stock on the open market.

5. the firm sells new shares of stock on the open market.

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b

The information content of a dividend increase generally signals that:

Select one:

1. the firm has a one-time surplus of cash.

2. the firm has few, if any, net present value projects to pursue.

3. management believes that the future earnings of the firm will be strong.

4. the firm has more cash than it needs due to sales declines.

5. future dividends will be lower.

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c)

Estimates using the arithmetic average will probably tend to _____ values over the long-term while estimates using the geometric average will probably tend to _____ values over the short-term.

Select one:

1. overestimate; overestimate

2. overestimate; underestimate

3. underestimate; overestimate

4. underestimate; underestimate

5. none of the above are correct

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d)

Systematic risk:

Select one:

1. is related to the overall economy.

2. is measured by beta.

3. is compensated for by the risk premium.

4. cannot be avoided if you wish to participate in the financial markets.

5. can be effectively eliminated through portfolio diversification.

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e)

The efficient set of portfolios

Select one:

1. contains the portfolio combinations with the highest return for a given level of risk.

2. contains the portfolio combinations with the lowest risk for a given level of return.

3. is the lowest overall risk portfolio.

4. Both A and B

5. Both A and C.