Which of the following statements is correct?

A. The effect of an efficient portfolio is that systematic risk is largely eliminated.

B. The Beta of a portfolio is the simple average of the Betas of the stocks in that portfolio.

C. A stock with a beta > 1 would be considered to be more risky than the overall stock market.

According to modern portfolio theory, a risk neutral investor will choose an optimal portfolio

A. to maximize risk

B. any of the above

C. to maximize return

AAPL has a beta of 1.3, a stock price of $228. The market has an 11 percent expected rate of return and a risk premium of 8 percent. What is the expected stock price two years from now?

A. $258

B. $293

C. $324

Bonds can be _____ rate bonds with a constant coupon rate over the life of the bond, or they can be _____ rate bonds with a coupon rate that varies over time depending on the level of interest rates.

A. floating, fixed

B. fixed, floating

C. zero, floating

Which of the following is not an advantage of debt financing?

Group of answer choices

A. Debt financing can leave a business vulnerable during hard times.

B. Principal and interest are known figures that you can plan, provided that the loan is not adjustable.

C. The interest on the loan is tax deductible.

Which of the following statements is not correct?

Common stockholders vote to elect the board of directors and on other issues

An all-equity firm cannot go bankrupt

Interest payments are not tax-deductible

Which of the following statements is correct?

A. Capacity is the ability of the borrower to make interest and principal payments on time.

B. Character is the quality and value of the assets pledged as collateral against the debt.

C. Capacity refers to the quality of the management, strategy, quality of earnings and past treatment of bondholders.

An investor in the 25% tax bracket is considering the IBM taxable bond that has a yield of 8% and a municipal bond has a yield of 5.5%. Both bonds have similar credit rating. Which bond should the investor purchase?

A. Either bond because they have the same yield.

B. The municipal bond.

C. The IBM taxable bond.

Which of the following statements is not correct?

A. Investment grade bonds are issued by stable companies with a low risk of default .

B. Investment grade bonds have higher interest rates than non-investment grade bonds.

C. Non-investment grade bonds have low credit ratings due to a high probability of the corporate issuer defaulting on its interest payments.