pt 2

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 is a correct reflection of the US stock market for the period 1926 until today?

Large cap stocks outperformed corporate bonds in an average year

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

Standard deviation of the firm's common stock

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

Systematic risk

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

Unsystematic

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

capital gains yield and total return

Wright Market 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 of the following terms best defines the stock market under these conditions?

efficient market

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

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

The capital structure of Pendekanti Products is 58 percent of common stock, 2 percent preferred stock, and 40 percent debt. The firm maintains a dividend payout ratio of 24 percent, has a beta of 1.08, and has na income tax rate of 21 percent. Given this information, which one of the following statements is accurate?

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

Standard deviation is a measure of which of the following?

volatility