About commercial paper and risk-return relationship

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Reference no: EM131994477

1. Which of the following statements is true about commercial paper??

a. ?Commercial paper always matures in two months.

b. ?Commercial paper is issued at a discount.

c. ?Commercial paper is issued in denominations of $100.

d. ?Commercial paper pays annual interest.

e. ?Commercial paper is issued by bankrupt firms.

2. Which of the following statements about risk-return relationship is correct?

a. ?If investors became more averse to risk, then the slope of the SML would become less steep.

b. ?A graph of the SML would show required rates of return on the vertical axis and standard deviations of returns on the horizontal axis.

c. ?As a result of change in investors' risk aversion, the required rate of return on low-beta stocks is impacted more when compared to the required rate of return on high-beta stocks.

d. ?An increase in the expected inflation would lead to an increase in the required return on all the risky assets by the same amount, assuming all other things were held constant.

e. ?The market risk premium is lower for higher beta stocks and higher for lower beta stocks Brief explanation would be appreciated for better understanding.

Reference no: EM131994477

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