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Bond ratings are designed to reflect the probability of a bond issue going into default. Which rating below reflects the MOST RISK ? CCC BB

Bond ratings are designed to reflect the probability of a bond issue going into default. Which rating below reflects the MOST RISK?

CCC

BB

C

AA

AAA

Financial Statements: Which of the following statements is TRUE?

Balance sheet provides a snapshot of a firms financial position at one point in time

Income statement summarizes a firms revenues and expenses over a given period of time

Statement of Cash Flows reports impact of a firms cash flows over a given period of time

A, B, and C are all TRUE.

A, B, and C are all FALSE.

Which of the following is NOT one of the ways to calculate Cost of Common Equity, r s, for Weighted Average Cost of Capital (WACC)?

CAPM: r s = r R F + (r M r R F )b

DCF: r s = (D 1 P 0 ) + g

Bond Yield Plus Risk-Premium: r s = r d + RP

IRR: YTM less (CAPM + DCF)

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