chapter 12,13,14 smart book Finance

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Dividends are the ________ component of the total return from investing a stock

income (dividends are always paid out in cash)

The WACC is the minimum return a company needs to earn to satisfy

its bondholders its stockholders

The second lesson from capital market history is that there is a link between risk & ________

return

To estimate the expected return on a risky asset, we need to know the ___. Multiple select question. stock's beta risk-free rate market risk premium annual dividend amount

stock's beta risk-free rate market risk premium

The excess return on a risky asset is the difference between the risky return and....

the risk-free rate

True or false: The return an investor in a security receives is equal to the cost of the security to the company that issued it.

true

The cost of capital depends on the _____ of funds, not the _____ of funds. Multiple choice question. source; use use; inflation use; source

use; source

The square of the standard deviation is _________

variance

What does WACC stand for?

weighted average cost of capital

a normal distribution has what type of shape....

(bell-curve) (symmetrical)

Based on average historical returns shown in the text, small-company stocks increased in value by ____ percent in a typical year

16%

Average Returns can be calculated how many different ways

2 different way

If you are forecasting a few decades in the future, you should calculate the expected return using....

Blume's Formula

when a company declares a dividend, shareholders generally receive...

CASH

what is commonly used to measure inflation

CPI - consumer price index

The formula for calculating the cost of equity capital that is based on the dividend discount model is:

RE = D1/P0 + g

the excess return on a risky asset is the difference between the __________ ________ and ____ ____ _____

RISKY RETURN and RISK FREE RATE

What ratio is calculated as the risk premium of the asset divided by the standard deviation

Sharpe Ratio

The Geometric Rate of Return takes what into account?

compunding

A firm's overall cost of capital will include both its cost of____capital and equity capital.

debt

Finding a firm's overall cost of equity is (straightforward/difficult).

difficult

defined as the annual dividends amount DIVIDED by the standard deviation

dividend yield

The return an investor in a security receives is ______ the cost of the security to the company that issued it.

equal to


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