BUSI 530 Quiz Risk and Financing

BUSI 530 Quiz: Risk and Financing

1. Although several stock indexes are available to inform investors of market changes, the Dow Jones Industrial Average:
2. “Dow up 14. Story at 6:00.” This means that:
3. The variance of an investment’s returns is a measure of the:
4. The actual real rate of return on an investment will be positive as long as the:
5. What is the beta of a 3-stock portfolio including 25% of stock A with a beta of 0.90, 40% of stock B with a beta of 1.05, and 35% of stock C with a beta of 1.73?
6. The required risk premium for any investment is given by the security market line. line: page 336
7. The average of the betas for all stocks is:
8. If the line measuring a stock’s historic returns against the market’s historic returns has a slope greater than 1.0, then the:
9. A firm’s WACC:
10. As a firm increases its debt ratio, debtholders are likely to demand higher rates of return.
11. An efficient capital market is one in which:
12. Bonds that have been sold only to a limited number of institutional investors are considered:
13. Suppose a firm needs fresh capital, but its management does not want to give up its controlling interest. The existing shares could be labeled Class A, and then Class B shares with limited voting rights could be issued to outside investors.
14. If an incompetent management team controls a large block of votes, it may use these votes to stay in control.
15. One way in which control of a corporation can be removed from the current board of directors is to: FIGHT A PROXY CONTEST
16. The SEC requires the sale of a private placement to be limited to a small number of knowledgeable investors
17. In many countries it is common even for large businesses to remain privately owned.
18. Stock underwriters are:
19. Firms go public primarily to
20. hen a public company makes a general cash offer of debt or equity, it essentially follows the same procedure used when it first went public
21. When asked about key factors of debt policy, financial managers commonly mention the tax advantage of debt and the importance of maintaining their credit rating.
22. MM’s proposition II without taxes states that the:
23. Leverage will ________ shareholders’ expected return and ________ their risk.
24. If a firm’s expected return on equity equals its expected return on assets, then the:
25. Debt financing affects neither the business risk nor the financial risk of the firm.