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1. Which of the following best describes the risk measure known as beta?
A. A measure of efficient frontier.
B. A measure of state dependent returns.
C. A measure of risk that cannot be diversified away by conforming portfolios.
D. A measure of the expected return of the market.
2. Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49 percent.
What is the firm's weighted average cost of capital if the tax rate is 34 percent?
A. 14.19%
B. 13.44%
C. 12.69%
D. 14.47%
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Which of the following is true of a zero coupon bond?
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Stephan and Chris have decided to acquire CellU in order to expand TechU’s product line. They are trying to decide how to finance the acquisition, and are currently looking at financing it by issuing bonds. TechU just issued an 18-year, 12 percent co..
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