Which of the following is considered an advantage to using the CAPM approa to caloulate the cost of equity? 1. This approach explicitly accounts for risk II. This approach applies only to companies that pay dividends III. This approach is not sensitive to estimates used as inputs in the model A) I only B) III only C) I and II only D) II and III only E) I, II and III 6. Which of the following statements are correct? I. The risk-free rate of return has a zero risk premium. II. The reward for bearing risk is called the standard deviation. III. Based on historical returns, there are rewards for bearing risk IV. In general, the higher the risk, the higher the expected retur, A). I and II only B). III and IV only C). I, III, and IV only D). II, III, and IV only E). I, II, III, and IV 7. Which of the following is true regarding the beta coefficient? A) It is a measure of unsystematic risk. B) A beta greater than one represents lower systematic risk than the market. Generally speaking, the higher the beta the higher the expected return. D) A beta of one indicates an asset is totally risk-free. E) The risk premium of an asset will increase if the beta of that asset decreases. C) c) The cost of debt capital for a firm is the return that the firm's creditors demand for new borrowings can be calculated by estimating the beta of the firm's equity and then using the SML can be estimated by finding the yield on recently-issued bonds with lower bond ratings can be calculated by looking at the coupon rates on existing bonds of similar risk can be observed directly even if the firm's bonds are not publicly trial