Complete each of the statements a)c).

In the CAPM framework, no reward is needed for the ( ) risk, which can be reduced to a small amount.

Answer:

In the CAPM framework, the ( ) is defined as the difference between the expected return on the market portfolio and the return on the risk-free asset.

Answer:

The value of a firms intangible capital, firm-specific knowledge, or future growth opportunities may not be realized outside the firm. Such inseparability gives rise to( ) costs of financial distress.

Answer:

Question 10 [5 pts]

Which of the following statements is correct? Choose only one.

Altmans Z score decreases as the probability of a firms bankruptcy increases.

In the CAPM framework, the systematic risk affects all investments in common and can be diversified away.

A high current ratio is preferable even if a firm is experiencing an excessively high level of inventories.

The CAPM beta measures the variability of an individual securitys returns over time.

NONE of the above.

Answer: