True or False

5. Bondholders must be compensated for default (credit) risk but stockholders are not compensated (in terms of their required rates of return) for default risk (think about the RRR (k) of bonds versus the RRR (k) of stock.

6. ________Equity is a free source of capital for a company. Shareholders do not have a required rate of return.

7. The firms net income belongs to the shareholders. Shareholders may receive the earnings in the form of dividends or the firm may also plow back the earnings into the company in the form of retained earnings.

8. A Treasury bill (government short-term debt) would have a lower standard deviation of returns than a company like GameStop.