TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1) The key to the future behavior of a company lies in the sales growth and the net profit margin. 1) _______

2) A company's estimated future earnings and its P/E ratio can be used to estimate the stock's future price.

2) _______

3) A temporary decline in earnings per share usually results in a temporary reduction of dividends. 3) _______

4) Risk is brought into the stock valuation process through the required rate of return. 4) _______

5) Both beta and the expected return on the market portfolio incorporate risk into the Capital Asset Pricing Model.

5) _______

6) The approach to stock valuation which holds that the value of a share of stock is a function of its future dividends is known as the dividend valuation model (DVM).

6) _______

7) One advantage of the dividend valuation model is that it does not need a required rate of return.

7) _______

8) The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.

8) _______

9) If a company's revenues and earnings are highly predictable, it's stock price will also be highly

predictable.

9) _______

10) Over the period from late 2008 through 2012, the bond market outperformed the stock market.

10) ______

11) When a bond is called, the bondholder generally faces a rate of return that is lower than expected.

11) ______

12) Investment-grade bonds are more interest rate sensitive than junk bonds.

12) ______