17) The capital asset pricing model return trade-off in which risk is measured in terms of the market returns as the correlation coefficient between a security and market rates of return. A) provides a C) provides ) depicts the total risk of a security a risk-return trade-off in which risk is measured in terms of beta. 18) The Security Market Line intercepts the vertical axis at assety equals the expected rate of return on the market portfolio B) the risk-free rate. C) beta 1 D) the market risk premium. 19) You are considering buying some stock in Continental Grain. Which of the following is an example of nondiversifiable risk? Risk resulting from a news release that several of Continental's grain silos were tainted C) Risk resulting from an explosion in a grain elevator owned by D) Risk resulting from a general decline in the stock market 20) A company has a capital structure that consists of 50% debt and 50% equity which of the following is generally true? A) The cost of equity financing is greater than the cost of debt financing B) The weighted average cost of capital is less than the cost of equity financing. C) The weighted average cost of capital is calculated on a before-tax basis. D) Both A and B. the following information, which describes the expected return and standard deviation for three different s, to answer the following question(s). xpected return 9.5% andard deviatioh9% Portfolio X Portfolio YPortfolio Z 8.8% 5.5% 9.5% 5.5% 21) An investor will get maximum risk reduction by combining assets that are A) negatively correlated B) positively correlated. C) uncorrelated. D) perfectly, positively correlated. ) If a risk averse investor must choose between investing in either portfolio X or portfolio Y, the A) she will always choose portfolio X over portfolio Y. B) she will always choose portfolio Y over portfolio X C) she will be indifferent between investing in portfolio X and portfolio Y. D) none of the above. 4