14. Which one of the following is cost of debt?

A. Coupon rate

B. Estimated yield to maturity

C. Coupon yield

D. Maturity

15. Why after-tax cost of debt is used in calculation of WACC?

A. Because interest expense is tax deductible

B. Because interest expense is not tax deductible

C. Because debts pay no dividend

D. Because dividends are tax deductible

9. Which one of the following is the best example of unsystematic risk?

A. Inflation exceeding market expectation

B. Increase in consumer spending

C. Unexpected decline in GDP growth rate

D. CEO embezzling millions of dollars from the company

17. The risk-free rate is 8 percent and the expected return on the market is 20 percent. Stock A has a beta of 1.2 and an expected return of 13.1 percent. Stock B has a beta of 0.75 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not?