Select only one option below:

The goal for a limited company should be:

a) minimize shareholder risk.

b) maximize profits.

c) maximize the value of the company to the shareholders

d) increase the size of the company.

A bond has two risks, which are?

a) interest rate risk & credit risk

b) interest rate risk & market risk

c) interest rate risk & liquidity risk

d) interest rate risk & currency risk

An effective portfolio:

a) has only company-specific risk.

b) gives the highest expected return for each given level of the risk-free interest rate.

c) has no risk left.

d) gives the highest expected return for each given unit risk.

Beta is a measure of?

a) unique risk

b) total risk

c) market risk

d) liquidity risk

The valuation of a share depends mainly on?

a) the number of outstanding shares and the number of shareholders.

b) The company's expected cash flows and discount rate.

c) Equity analyst.

d) The relationship between the company's price and profit.

If a share is overpriced, it would - plot / end up / be placed

a) above the security market line.

b) below the security market line.

c) on the security market line.

d) over the effective front

The cost of capital is the same as the cost of equity for companies that are financed

a) completely with debt.

b) of both debt and equity.

c) entirely with equity.

d) with 50% equity and 50% liabilities

Indicate whether the following three statements are TRUE OR FALSE:

• All information is discounted in stock prices in an efficient weak stock market.

• A zero coupon bond is a bond whose coupons have become worthless

• The specific risk of a portfolio (Unique risk) decreases when the number of shares increases