Finance 450 Final

Which of the following yields on a stock can be negative?

Capital gains yield and total return

Wright Market Research is able to borrow money at a rate of 6.8 percent per year. This interest rate is called the:

Cost of debt

Assume all stock prices reflect all relevant information on those stocks at all times. Which one of the following terms best defines the stock market under these conditions?

Efficient market

Of the options listed below, which is the best example of systematic risk?

Investors panic causing security prices around the globe to fall precipitously

Which of the following statements regarding the aftertax cost of debt is accurate?

It is highly dependent upon a company's tax rate

Which of the following statements bests describes the principle of diversification?

Spreading an investment across many diverse assets will eliminate some of the total risk

The weighted average cost of capital for a firm can depend on all of the following except:

Standard deviation of the firms common stock

Which of the following is a risk that is inherent in all stock portfolios?

Systematic risk

The capital structure of Pendekanti Products is 58 percent common stock, 2 percent preferred stock, and 40 percent debt. The firm maintains a dividend payout ratio of 24 percent, has a beta of 108, and had income tax rate of 21 percent. Which of the following statements is accurate?

The cost of equity is unaffected by a change in the company's tax rate.

A news flash about a single company just appeared that caused the company's stock to drop in value by 20 percent in one day. What type of risk does this news flash best represent?

Unsystematic