BUS 401 QUIZ 4

 1.	Question :	Which of the following statements regarding the cost of equity is true?

 	


Question 2.	Question :	In order to find the cost of equity using the firm- cost of debt, the rule of thumb is to:

 	


Question 3.	Question :	Which of the following statements regarding the cost of debt is true?

 	



Question 4.	Question :	Using the Capital Asset Pricing Model, estimate the required rate of return for Caterpillar Incorporated stock if the company- beta is 1.87 (as of February 1, 2013). Use a risk-free rate of 3% and a market risk premium of 6%.

 	


Question 5.	Question :	If an investor purchases a share of stock for $300, collects a dividend during the year equal to $35 a share, and sells the stock at the end of the year for $289, what is the investor- return for the year?

 	



Question 6.	Question :	In the Capital Asset Pricing Model, the market risk premium can be thought of as:

 	


Question 7.	Question :	We assume investors are risk averse, and therefore they:

 	


Question 8.	Question :	Which of the following statements regarding the cost of preferred stock is true?

 	


Question 9.	Question :	Which of the following is true regarding market risk?

 	



Question 10.	Question :	Chapter 9 discusses three different types of returns. Identify the item in the list below that is NOT one of those three types of returns.