Question 19 1 pts If a company has cash earnings of $300 million per year, assets of $1.5 billion, and interest expense on debt of $10 million per year, which of the following is most likely true about the credit ratings of their existing bonds? O These bonds are "high yield" bonds O These bonds are barely investment grade O These bonds are probably in default O These bonds are very highly rated Question 18 1 pts What is one reason most CFO's still rely on the CAPM to estimate cost of capital in spite of the fact that it fails to explain the returns on all stocks? O The CAPM estimates always underestimate the cost-of-capital, so CFOs can use the CAPM to deceive shareholders into believing their companies are worth more than is actually true O CFOs lack the technical ability to use anything more sophisticated than the CAPM O They simply do not know that the CAPM has problems O None of these O There is not necessarily a reliably better/generally accepted alternative model, and they have to use something Question 17 1 pts You estimate the alphas for a bond fund manager and a equity fund manager. You estimate an alpha of 2% (per year) for the bond manager and a 4% (per year) alpha for the equity fund manager. Assuming you trust both alphas, which manager would you invest more in? O None of the above O The bond fund manager, because their alpha is lower o The equity fund manager, because their alpha is higher o It depends on the diversifiableon-systematic risk of each fund O You would invest in both in equal proportions