Financing 100 Milestone 3

If a portfolio regularly falls twice as much as a benchmark index rises, the portfolio's beta coefficient is __________.

-2.0%

The risk that your investment will lose value because your return is dependant on the stability of a secondary investment is known as __________.

asset-backed risk

A security that falls above the security market line is __________.

attractive for an investor

Curtis purchased stock with an initial share price of $140, and sold it when the share price was $119. While he owned the stock, he earned $10 in dividends.What was his total percentage return on the investment?

-7.86%

Calculate a company's total leverage given the following information: Change in sales = 7% Change in earnings = 10%

1.43

Which of the following is true of systematic risk?

It is the risk associated with a general downward turn of the market or a market segment.

Using the following variables, calculate an organization's cost of debt on a $500,000 bond. Rf: 1% credit-risk rate: 5% t: 15%

$25,500

You own a small manufacturing business that produces widgets. You have spent $600,000 acquiring the fixed assets you need to produce widgets. Each widget costs you $20 to make and they sell for $65 each, so your variable cost is 30.8% of the overall revenue.At your current level of operating leverage, how many widgets must you sell to break even?

13,333

You invest $1,000 in a stock that has a 15% chance of a 1% return, a 60% chance of a 5% return and a 25% chance of a 7% return. What is your expected return after one year?

4.9%

Select the true statement about the bankruptcy process.

A company receives a stay from any collections activity after filing a bankruptcy petition.

Which of the following is true of portfolio diversification?

A diversified portfolio containing negatively correlated investments has a lower variance than a portfolio containing a single asset type.

Which of the following credit ratings would make a country or company have the easiest time raising capital?

AAA

What is the combination of debt and equity used by a company to finance its activities known as?

Capital structure

Company A Company B Market Value of Equity$400,000$600,000Market Value of Debt$100,000$800,000Cost of Equity9% 9%Cost of Debt3% 4%Tax Rate35% 35% Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 6.5%?

Neither Company A nor Company B

Marty receives a tip that the price of shares of an oil company are about to fall significantly. In order to avoid a huge loss, he goes into his online brokerage account and sells all of the stock that he owns in the oil company.What type of market transaction is taking place?

Secondary market offering

As a securities dealer, Patrick is able to easily know and compare the prices of stocks, which are now consolidated in a national market system. Which federal regulation established this process?

Securities Act Amendments of 1975

Which of the following is a tenet of semi-strong-form efficiency?

Share prices respond immediately to new information that is made public.

A company is considering a new plan for its capital structure. Which of the following is true if, under the new plan, the company's weighted average cost of capital exceeds the expected return?

The company's proposed capital structure may put it at risk for bankruptcy.

Like the capital asset pricing model, the bond yield plus risk premium (BYPRP) approach is useful for __________.

estimating the required return on a company's equity