The clientele effect predicts that some shareholders select into holding shares of particular company based on its ...

a.share price

b.expected return

c.dividend yield

d.systematic risk

The approach to determining the cost of capital of a project that is making appropriate adjustments to the firm's WACC based on the relative riskiness of the project is called:

A. the subjective approach.

B. the pure play approach.

C. the multiples based approach.

D. the normative approach.

In a world with taxes and bankruptcy costs, the static theory of capital structure suggests that ...

a. firm value and WACC are inversely related

b. WACC is an increasing function of the tax rate.

c. firm value is maximized when the debt-to-equity ratio is 1.

d. firm value increases in the interest paid on debt.

Which of these statements reflects the Hamada Equation?

a. the equity beta is a linear function of leverage.

b. the beta of the unlevered firm is equal to 1.

c. the asset beta is a linear function of leverage.

d. the debt beta is a linear function of leverage.

The following may explain the meaning of "systemic misconduct":

I.Poor conduct in institutions that rather than be condemned is condoned by the institution.

II.Institutional practices occurring over a considerable length of time that are detrimental to the interests of the institution's clients.

III.Activities that are damaging to customers' interests and occurring across many institutions in the industry.

IV.When CEOs are paid millions of dollars even though the institutions may not be making a profit.

V. A number of poor conduct cases occurring within an institution which were known to management.

According to the Ethics in Finance modules, which combination of the abovebestexplains the meaning of systemic misconduct within the Financial Services industry?

a. II, III, V

b. I, II, III

c. I, II, III, V

d. I, II, V

e. I, III, IV

A stock's total risk is:

A.another term for its systematic risk.

B.another term for its risk premium over the market.

C.measured by the standard deviation of its returns.

D.measured by its beta.

Among 2 otherwise identical firms, firm Without is all equity and firm With has issued some debt. Firm With ...

a.will have higher earnings per share, provided return on assets fall below the cost of debt.

b.will have lower or higher earnings, depending on the corporate tax rate.

c.will have higher earnings per share, provided return on assets exceeds the cost of debt.

d.will have lower earnings per share, provided return on assets exceeds the cost of debt.

Which of the following statements are true about venture capitalists?

I.VCs tend to stay with their investments for at least 10 years.

II.VCs primarily invest in firms with moderate risk profiles.

III.VCs push for aggressive capital expenditures and growth.

IV.VCs tend to get involved in management decisions.

a.III and IV.

b.I and III.

c.I and II.

d.II and IV.