15. The difference between systematic and unsystematic risk is a. Systematic risk affects only one asset while unsystematic risk affects many assets. b, unsystematic risk affects only one asset while systematic risk affects many assets. C. Systematic risk affects the operations of the business while unsystematic affects the finances of the business d. unsystematic risk affects the operations of the business while systematic affects the finances of the business e. None of the above is true. 16.Reduced trading transaction costs is one of the reasons for: a. Reverse Stock splits b. Forward stock splits C. Cash dividends d. Homemade dividends e. Clientele effect 17. The idea that a company increases its borrowing until the advantage from one more dollar o borrowing is offset by the disadvantage of financial distress is known as a. The Capital Asset Pricing Model b. M&M Proposition I c. M&M Proposition II d. The Static Theory of Capital Structure e. The Principal of Diversification 18. Funding all positive NPV Investments and maintaining a certain debt/equity ratio are actions associated with which of the following? a. Absolute Priority Rule b. Residual Dividend Policy c. International Fisher Effect d. Weighted Average Cost of Capital e. Static Theory of Capital Structure 19. ABC Company just declared a dividend of $2.00 per share. The stock is currently selling at $50 per share and the average stockholder is in the 25% tax bracket. On the ex-dividend day, the price will very likely be a. $48.00 b. $48.50 C. $47.50 d. $52.00 e. $51.50 20. The Capital Asset Pricing Model and the Security Market Line Approach to cost of Equity: a. Are the same formula. b. Are the same formula except for the tax effect. c. Are two ways to compute WACC. d. Can provide two different answers. e. None of the above