FIN 322 Final Review

unsystematic risk

portfolio diversification eliminates which one of the following?

cost of debt

lester lent money to the Corner Store by purchasing bonds issued by the store. The rate of return that he and the other lenders require is referred to as the:

decrease in gross domestic product

which of the following is the best example of systematic risk?

risk that affects a large number of assets

which one of the following describes systematic risk?

a warehouse fire

which one of the following is the best example of unsystematic risk?

cost of capital

which one of the following is the minimum required rate of return on a new investment that makes that investment attractive?

weighted average cost of capital

which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities?

diversification

which one of the following terms best refers to the practice of investing in a variety of diverse assets as a means of reducing risk?

>0 but <1

a risky security has less risk than the overall market. What must the beta of the security be?

measured by beta

systematic risk is:

is equal to the stock's dividend yield

the cost of preferred stock:

cost of equity and its aftertax cost of debt

the weighted average cost of capital is defined as the weighted average of a firm's: