The capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and:

a.

Unsystematic risk.

b.

The cost of debt.

c.

Systematic risk.

d.

None of these.

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An analyst predicts that a companys dividend at the end of year t+1 will be $10. The analyst further expects that after year t+1 the companys dividends will grow indefinitely at a rate of 2 per cent. The cost of equity is 7 per cent. Under these assumptions, what will be equity value at the end of year t?

a.

$209.35

b.

$111.11

c.

$142.86

d.

$200

When making a forecast for a firm outside of the financial sector, what would be a likely key driver?

a.

Gross margin.

b.

Sales forecast.

c.

Asset turnover.

d.

None of these choices.

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Debt rating agencies express an opinion on:

a.

The ability of the firm to meet its financial obligations in full.

b.

The ability of a firm to afford a certain yield.

c.

The ability of a firm to afford a certain yield and the value of its security.

d.

The ability of the firm to meet its financial obligations in full and on time.

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