# Fundamentals of Corporate Finance Study Set 23

## Quiz 13 :Cost of Capital

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The principle of diversification tells us that:
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E

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Suzie owns five different bonds valued at $36,000 and twelve different stocks valued at$82,500 total.Which one of the following terms most applies to Suzie's investments?
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B

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The expected risk premium on a stock is equal to the expected return on the stock minus the:
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B

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If a stock portfolio is well diversified, then the portfolio variance:
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Which one of the following is represented by the slope of the security market line?
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The expected return on a stock given various states of the economy is equal to the:
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The _____ tells us that the expected return on a risky asset depends only on that asset's nondiversifiable risk.
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You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy.Given the probabilities of each state of the economy occurring, you anticipate that your stock will earn 6.5 percent next year.Which one of the following terms applies to this 6.5 percent?
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Standard deviation measures which type of risk?
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A news flash just appeared that caused about a dozen stocks to suddenly drop in value by about 20 percent.What type of risk does this news flash represent?
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Which one of the following is a risk that applies to most securities?
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Steve has invested in twelve different stocks that have a combined value today of \$121,300.Fifteen percent of that total is invested in Wise Man Foods.The 15 percent is a measure of which one of the following?
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The expected return on a portfolio considers which of the following factors? I.percentage of the portfolio invested in each individual security II.projected states of the economy III.the performance of each security given various economic states IV.probability of occurrence for each state of the economy
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Treynor Industries is investing in a new project.The minimum rate of return the firm requires on this project is referred to as the:
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The expected return on a portfolio: I.can never exceed the expected return of the best performing security in the portfolio. II.must be equal to or greater than the expected return of the worst performing security in the portfolio. III.is independent of the unsystematic risks of the individual securities held in the portfolio. IV.is independent of the allocation of the portfolio amongst individual securities.
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Which one of the following is a positively sloped linear function that is created when expected returns are graphed against security betas?
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Which one of the following measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset?
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Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?
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