Reference no: EM131905302

1. Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?

2. Risk aversion means:

a. Invertors prefer less risk when expected returns are equal.

b. Investors always choose low risks stocks.

c. Gamblers don't behave rationally.

d. Investors avoid risk at all costs.

e. None of the above.

3. A portfolio is made up of four stocks:

Expected return Amount Invested

Stock A 16% $100,000

Stock B 12% $200,000

Stock C 18% $200,000

Stock D 20% $100,000

- The expected return of the portfolio is:

a. 16.50%

b. 16.00%

c. 13.20%

d. 12.50%

e. none of the above.