MBA 702 Exam Study Guide –
Practice Questions with
Verified Answers. GRADED A+.
Latest 2026/2027 Update
LSUS Corporation has 80,000 bonds outstanding that are selling at par value.
Bonds with similar characteristics are yielding 8.6 percent. The company also
has 4 million shares of common stock outstanding. The stock has a beta of 1.1
and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the
market risk premium is 8 percent. LSUS Corporation's tax rate is 34 percent.
What is LSUS Corporation's weighted average cost of capital? - Answer✔✔-
11.47%
A year ago, Han purchased 500 shares of LSUS Corporation's stock at a price of
$49.03 per share. The stock pays an annual dividend of $.10 per share. Today,
you sold all of your shares for $58.14 per share. What is his total dollar return
on this investment? - Answer✔✔-$4,605
A stock had returns of 12 percent, 6 percent, 13 percent, -11 percent, and -2
percent over the past five years. What is the geometric average return for this
time period? - Answer✔✔-3.19%
, Assume LSUS Corproation is similar to its industry with one exception, it has
high fixed costs relative to all other firms in that industry. Given this, you
should expect LSUS Corproation - Answer✔✔-a higher beta than its industry.
The weighted average cost of capital for a firm is the: - Answer✔✔-overall rate
which the firm must earn on its existing assets to maintain its value.
Which one of these statements related to beta is correct? - Answer✔✔-The
sample size used to compute beta may be too small to yield a reliable result.
Standard deviation measures _____ risk while beta measures ____ risk. -
Answer✔✔-unsystematic; systematic
The beta of a firm is more likely to be high under which two conditions? -
Answer✔✔-high cyclical business activity and high operating leverage
You have a portfolio comprised of two risky securities. This combination
produces no diversification benefit. The lack of diversification benefits indicates
the returns on the two securities: - Answer✔✔-move perfectly in sync with one
another.
Which one of the following statements concerning the standard deviation is
correct? - Answer✔✔-The higher the standard deviation, the higher the
expected return.
A portfolio consists of Stocks A and B and has an expected return of 11.6
percent. Stock A has an expected return of 17.8 percent while Stock B is
Practice Questions with
Verified Answers. GRADED A+.
Latest 2026/2027 Update
LSUS Corporation has 80,000 bonds outstanding that are selling at par value.
Bonds with similar characteristics are yielding 8.6 percent. The company also
has 4 million shares of common stock outstanding. The stock has a beta of 1.1
and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the
market risk premium is 8 percent. LSUS Corporation's tax rate is 34 percent.
What is LSUS Corporation's weighted average cost of capital? - Answer✔✔-
11.47%
A year ago, Han purchased 500 shares of LSUS Corporation's stock at a price of
$49.03 per share. The stock pays an annual dividend of $.10 per share. Today,
you sold all of your shares for $58.14 per share. What is his total dollar return
on this investment? - Answer✔✔-$4,605
A stock had returns of 12 percent, 6 percent, 13 percent, -11 percent, and -2
percent over the past five years. What is the geometric average return for this
time period? - Answer✔✔-3.19%
, Assume LSUS Corproation is similar to its industry with one exception, it has
high fixed costs relative to all other firms in that industry. Given this, you
should expect LSUS Corproation - Answer✔✔-a higher beta than its industry.
The weighted average cost of capital for a firm is the: - Answer✔✔-overall rate
which the firm must earn on its existing assets to maintain its value.
Which one of these statements related to beta is correct? - Answer✔✔-The
sample size used to compute beta may be too small to yield a reliable result.
Standard deviation measures _____ risk while beta measures ____ risk. -
Answer✔✔-unsystematic; systematic
The beta of a firm is more likely to be high under which two conditions? -
Answer✔✔-high cyclical business activity and high operating leverage
You have a portfolio comprised of two risky securities. This combination
produces no diversification benefit. The lack of diversification benefits indicates
the returns on the two securities: - Answer✔✔-move perfectly in sync with one
another.
Which one of the following statements concerning the standard deviation is
correct? - Answer✔✔-The higher the standard deviation, the higher the
expected return.
A portfolio consists of Stocks A and B and has an expected return of 11.6
percent. Stock A has an expected return of 17.8 percent while Stock B is
