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2 True or False questions: 2 points each (1) The security market line(SML) reflects the required return in the marketplace for each level of nondiversifiable

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2 True or False questions: 2 points each (1) The security market line(SML) reflects the required return in the marketplace for each level of nondiversifiable risk (beta). True False (2) Asset P has a beta of 0.9. The risk-free rate of return is 8%, while the return on the market portfolio of assets is 14%. The asset's required return is 13.4%. True False (3) Use of the Capital Asset Pricing Model(CAPM) in measuring the cost of ordinary equity differs from the constant dividend growth valuation model in that it directly considers the firm's risk as reflected by beta. True False (4) Relevant cash flows are the incremental cash outflows and inflows associated with a proposed capital expenditure. Ture False (5) A financial lease is often also referred to as a capital lease. True False

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