28The concept of stock correlation shows:

1. The extent to which the variance of two stocks are similar.
2. The average returns of two stocks.
3. The extent to which the returns on two assets move together.
4. The average risk of two stocks.
5. How risky two assets are.

31A firm finances its projects with 45% common stock, 15% preferred stock, and 40% debt. The firm has a 34% marginal tax rate. The cost of equity is 9%, the cost of preferred is 8%, and the cost of debt is 7%. What is the WACC?

1. 7.80%
2. 7.10%
3. 6.98%
4. 8.05%
5. 7.24%

38The market-required rate of return on debt is called the:

1. Coupon rate.
2. Yield to maturity.
3. After-tax current yield.
4. Yield to call.
5. Current yield.