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finance homework true false




Question;40);The risk that inflation rates;are likely to increase in the next year is an example of common risk.;A) True;B) False;42);In;general, it is possible to eliminate ________ risk by holding a large;portfolio of assets.;A);systematic;B);unsystematic and systematic;C);unsystematic;D) none;of the above;43);When we;combine stocks in a portfolio, the amount of risk that is eliminated depends;on the degree to which;the;stocks face common risks and move together.;A) True;B) False;44)You;expect General Motors (GM) to have a beta of 1.3 over the next year and the;beta of Exxon Mobil (XOM) to be 0.9 over the next year. Also, you expect the;volatility of General Motors to be 40% and that of Exxon Mobil to;be 30% over the next;year. Which stock has more systematic risk? Which stock has more total risk?;A);XOM, GM B) XOM, XOM C) GM, GM D) GM, XOM;45);Your estimate of the market;risk premium is 7%. The risk-free rate of return is 3.5% and General Motors has;a beta of 1.3. According to the Capital Asset Pricing Model (CAPM), what is its;expected return?;A) 12.6%;B) 11.3%;C) 12.9%;D) 12.1%;46);The relative;proportion of debt, equity, and other securities that a firm has outstanding;constitute its;A) current ratio.;B) capital;structure.;C) asset ratio.;D);none of the above;47);The fact that the;interest paid on debt is a tax-deductible expense increases the cost of debt;financing.;A) True;B) False;48)Ford;Motor Company is discussing new ways to recapitalize the firm and raise;additional capital. Its current capital structure has a 20% weight in equity;10% in preferred stock, and 70% in debt. The cost of equity capital is 14%, the;cost of preferred stock is 10%, and the pretax cost of debt is 9%. What is the;weighted average cost of;capital for Ford if;its marginal tax rate is 30%?;A);8.21% B) 7.87% C) 9.21% D) 8.89%;49);Divisional costs of capital;are more appropriate when evaluating a project for a line of business when the;types of business in a firm are;A) different.;B) similar.;C) mature;businesses.;D);new businesses.;50);Internal financing is more costly than external financing because of issuance;costs.;A) True;B) False


Paper#48756 | Written in 18-Jul-2015

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