1A. Flotation Cost is the cost of selling a security and therefore it needs to be taken into account in the cost of capital calculations.

True

False

1B. The amount owed to suppliers also falls under the umbrella of equity financing.

True

False

1C. Fixed costs are not dependent on the amount of goods and services produced by the company during a period.

True

False

1D. What happens to the expected return on a security as its Beta increases?

		Expected return on the security and its Beta are not related at all.
		Expected return on the security increases.
		Expected return on the security decreases.
		None

1E. The Beta of a security is equal to 1. However, the rate of return on this security is higher than the rate of return on the market portfolio. Therefore this security is overpriced.

True

False

1F. The Beta of a security is 0.7. Therefore, the price of (the rate of return on) this security is less volatile than the price of (the rate of return on) the market portfolio.

True

False

1G. The risk free rate is 2% and the expected rate of return on the market portfolio is 5%. What is the expected return on a security if its Beta is 1.3?

		6.3%
		5.9 %
		3.3 %
		5 %