1. A zero-coupon bond has a ____ of zero.

a. yield to maturity (YTM)

b. coupon rate

2. How a company's stock trades relative to the market does not impact the capital asset pricing model (CAPM).

True

False

3. Issuing stocks (equity) is always a better way to raise capital compared to bonds (debt) because there is no risk of default.

True

False

4. What capital structure is best for a company with the following expected cash flows.

Years	0	1	2	3	4
Cash Flows	$0	$0	$0	$0	$200,000

A. Debt: 0%, Equity: 100%

B. Debt: 50%, Equity: 50%

C. Debt: 100%, Equity: 0%

5. A company with a beta of 1 is ______ volatile than the index (the market).

less

more

equally