1.Match the synonyms.

-leverage

-cost of capital

-expected return

-intrinsic value

-No Arbitrage

-arbitrage profit

-NPV of future investments

synonym bank: required return debt fundamental value free lunch growth options expected holding period return (HPR) Law of One Price

2.The difference between the expected return and the cost of capital for a stock is called (one word)

3.A stock with a negative alpha is ?

4.A firm has 5 million shares outstanding, trading at $20 per share, and $30 million in debt. The market capitalization is:

5.The market value of a company is always equal to the market value of the assets in place.(T/F)

6.A market in which stock prices reflect all available information is called a(n)_________ capital market.

7.we learn several equivalent statements that describe a well-functioning capital market:

a. The current market price of any security is equal to the (two words) _______ ________ .

b. The alpha of any security is (one word or number) _________ .

c. The NPV of investing on the capital market is (one word or number)__________ .

d. The expected return on any security is equal to the (three words at most)______ ______ _______ .