Unsystematic influence affected mini return

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Reference no: EM132056785

1. Suppose the MiniCD Corporation's common stock has an expected return of 12%. Assume the risk-free rate is 4%, the expected market return is 9%, and no unsystematic influence affected Mini's return. The beta for MiniCD is:

a. 0.89.

b. 1.60.

c. 2.40.

d. 3.00.

e. It is impossible to calculate beta without the inflation rate.

2. Three factors likely to occur in the APT model are:

a. Unemployment, inflation, and current rates.

b. Inflation, GNP, and interest rates.

c. Current rates, inflation and change in housing prices.

d. Unemployment, college tuition, and GNP.

e. This cannot be determined or even estimated.

3. A key assumption of MM's Proposition I without taxes is that:

a. Financial leverage increases risk.

b. Individuals can borrow on their own account at rates less than the firm.

c. Individuals must be able to borrow on their own account at rates equal to the firm.

d. Managers are acting to maximize the value of the firm.

e. All of the other answers.

Reference no: EM132056785

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