1. Which of the following types of risk is the most diversifiable?

	a.	Industry specific risk.
	b.	Project specific risk.
	c.	International risk.
	d.	Market risk.

2. Which of the following is true about a beta estimate calculated by running a regression?

	a.	The estimate of beta has nothing to do with market risk.
	b.	The estimate of beta can be considered a fundamental beta.
	c.	The estimate of beta would likely be very similar if a different time period was used.
	d.	The estimate of beta is a levered beta.

3. Which of the following is true when estimating the cost of debt for a firm?

	a.	Focusing on the long term cost of debt and ignoring the amount of short term debt will likely cause the cost of debt to be under estimated.
	b.	The cost of debt can be estimated by the coupon rate of an existing long term bond issued by the firm.
	c.	The easiest approach to estimating the cost of debt is to use the yield to maturity based upon the market price of existing debt that is widely traded.
	d.	Lease commitments can be ignored and should never be considered in calculating the cost of debt.

4. Which of the flowing statements related to default or yield spreads is not true?

	a.	The default spread on longer term bonds is usually larger than on short term bonds of the same rating.
	b.	As bonds ratings are lower, yields (or default) spreads become greater.
	c.	Default spreads need to be re-estimated periodically due to changing macroeconomic conditions.
	d.	Default spreads on bonds of a given rating are usually constant over time.

5. Which of the following firm characteristics would increase the default risk of the firm?

	a.	The firm generates a large amount of cash flow.
	b.	A firm with less liquid assets.
	c.	A high EBITDA interest coverage ratio.

d.

The firm generates stable and consistent cash flows.