AOL Finance Test 2023 with 100% correct answers

WACC (weighted average cost of capital) correct answersA weighted average of the component costs of debt, preferred stock, and common equity. CAPM (Capital Asset Pricing Model) Formula correct answersKcs = Rrf + B(Rm-Rrf) where Rrf = risk free rate, B = beta, Rm = return on the market, Rm-Rrf = risk premium CAPM (Capital Asset Pricing Model) correct answersa model based on the proposition that any stock's required rate of return is equal to the risk-free rate of return plus a risk premium that reflects only the risk remaining after diversification WACC Formula correct answers= WeRe + WdRd(1-Tc) + WpRp P=Preferred stock foreign exchange rate correct answersthe price of one currency in terms of another Direct Exchange Rate correct answersspecifies the value of the currency in U.S. dollars.For example, the Mexican peso may have a value of $.10 Indirect Exchange Rate correct answersspecifies the value of the currency as the number of that currency equal to a U.S. dollar. For example: 98 Yen per dollar. =1/direct Parity interest rate correct answersF0/E0 =(1+rf (DOM))/(1+rf (FOR)) Debt as source of capital correct answersIssue debt lowers tax reductions. A firm borrows money at a fixed interest expense. Example=bonds, loans Equity as a source of financing correct answersIssuing stock as a source of financing