1. Adding a risky asset to a portfolio that has beta close to 1, will cause beta of new portfolio to_____

compare to the beta of the original portfolio.

a) decrease

b)increase

c) remain constant

d) cannot be determined

2. in the calculation of WACC the cost of that should be:

a) before tax cost of debt

b) multiplied by the tax rate

c) after tax cost of debt

d) divided by the tax rate