BUS 401 Week 4 Quiz

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BUS 401 Week 4 Quiz  Check this A tutorial
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01-NEW/BUS-401-Week-4-Quiz 1.) Investors will
make an investment if  the historical rate of
return exceeds the expected rate of return.  the
required rate of return exceeds the expected rate
of return.  the expected rate of return exceeds
the actual rate of return.  the expected rate of
return exceeds the required rate of
return.     2.) Which of the following is true
regarding market risk?  It is measured by
beta.   It is also called nondiversifiable
risk.   It is also called systematic risk.   all
of the above   3.) Which of the following
statements regarding the cost of equity is
true?  It can be estimated in three different
ways.   It is always estimated using the present
value of future dividends approach.  It is
estimated by solving for the discount rate for a
perpetuity.    
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4.) The weighted average cost of capital is  the
average return for the companys stock over the
past several years.  the average cost, including
commissions, for raising capital for the
firm.  an average required return for each of
the sources of capital used by the firm to
finance its projects, weighted by the amount
contributed by each source.  interest payments
and dividends, divided by the price of bonds and
stock, respectively.      5.) In the Capital
Asset Pricing Model, the risk-free rate  links
the CAPM to current market conditions.   is the
historic long-term average rate of government
bonds.  can be approximated by using yields on
high-rated corporate bonds.  is always the
current yield on 30-year US government Treasury
bonds.    6.) In the Capital Asset Pricing Model,
the market risk premium can be thought of
as  the return investors expect to earn for each
unit of risk as measured by beta.  the risk
premium that any asset must pay above the
risk-free rate.  the expected return on the
market portfolio (or a broad market index).  a
measure of risk of an asset.     
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7.) A bond pays semiannual coupon payments of 30
each. It matures in 20 years and is selling for
1,200. What is the firms cost of debt if the
bonds par value is 1,000? (Dont forget this is
a semiannual coupon.)  2.23   4.48   1.80   3.6
0    8.) Which of the following is beta is used
for?  estimating a regression line   estimating a
firms total risk to be used in the
WACC   estimating a firms market risk and used
with the CAPM   estimating the amount of leverage
used by the firm    9.) The discount rate used in
project evaluation should  be based on the
firms overall risk.   be based on each projects
risk.   be estimated using the WACC for all
projects.   All of the above are
correct.    10.) The financing mix reflected in
the WACC should  reflect the desired mix and not
necessarily the mix being used to finance a
specific project.  vary from project to project,
depending on how they are financed.  always
reflect the firms current capital
structure.   None of these answers is
correct.  For more classes visit http//www.assi
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