ms nave same systematic and firm-specific risk Firm A has higher systematic risk and firm-specific risk Both firms have same systematic risk; Firm A has higher firm-specific risk Question 5 20 pts The common stock of Highlyte Corp. has an expected return of 13%. The expected market risk premium is 9% and the risk-free rate is 4%. What do you know about HighLyte's beta? Beta is 0 Beta is negative Beta is more than 1 Beta is 1 20 pts Question 6 Stock X Question 7 20 pts Machinex Inc. is financed with 50% equity and 50% debt and there are no taxes. Assuming Machinex decides to increase its debt financing by taking out a bank loan and repurchasing shares of stock. what will happen to the cost of equity (re)? Given this change in re. what will happen to the stock price of Machinex assuming that the shares are correctly priced using the constant-growth dividend discount model? re decreases: stock price decreases re does not change: stock price increases re decreases: stock price does not change re increases: stock price increases re increases; stock price decreases 20 pts Question 8 Accept if risk-free rate > 2.8% Accept if risk-free rate > 10% Question 15 20 pts Over the previous four years. Bastian Inc has produced the following annual returns: -25%, -5%, 30%, 75%. Based on this data, what is Bastian's average return, sample variance and sample standard deviation? average 18.75%; sample variance 1922.92: sample standard deviation 43.85% average 75%, sample variance 16.67, sample standard deviation 4.08% average 75%, sample variance 5768.75, sample standard deviation 75.95% average 18.75%; sample variance 5768.75; sample standard deviation 75.95% D Question 16 20 pts Beta is more than 1 Beta is 1 Question 6 20 pts Rachel has three investment options: Stock X, Stock Y and Stock Z. Stock X has an expected return of 10%, Stock Y has an expected return of 22% and Stock Z has an expected return of 3%. The expected market return is should achel purchase to minimize her systematic risk? Stock Z Stock Y Stock X 20 pts Question 7