17/19 that's 89%
RETAKE
17 questions were answered correctly.
2 questions were answered incorrectly.
1
You invest $7,000 in a stock that has a 25% chance of a 6% return, a
35% chance of a 9% return and a 40% chance of a 10% return.
What is your expected return after one year?
9.00%
8.65%
7.85%
8.25%
RATIONALE
8.65% is the weighted average of all of the return probabilities.
CONCEPT
Expected Return
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2
Select one reason a company's capital structure may include more
equity than debt.
Equity has significant tax advantages that debt does not.
, Too much debt will decrease a company's volatility.
Relying too heavily on debt can increase the interest rate that a
company must pay on its debt.
Taking on more equity means that a company will be more leveraged.
RATIONALE
The additional debt would increase the associated risk.
CONCEPT
Capital Structure Considerations
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3
A security that falls below the security market line has __________.
a low expected return and a low price
a low expected return and a high price
a high expected return and a low price
a high expected return and a high price
RATIONALE
It's stuck below the SML and would have a lower expected return and, therefore, a
higher price at that level of risk.
CONCEPT
Understanding the Security Market Line
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4
You own a small manufacturing business that produces widgets. You
have spent $150,000 acquiring the fixed assets you need to produce
widgets. Each widget costs you $2 to make and they sell for $15 each,
so your variable cost is 13.3% of the overall revenue.
RETAKE
17 questions were answered correctly.
2 questions were answered incorrectly.
1
You invest $7,000 in a stock that has a 25% chance of a 6% return, a
35% chance of a 9% return and a 40% chance of a 10% return.
What is your expected return after one year?
9.00%
8.65%
7.85%
8.25%
RATIONALE
8.65% is the weighted average of all of the return probabilities.
CONCEPT
Expected Return
Report an issue with this question
2
Select one reason a company's capital structure may include more
equity than debt.
Equity has significant tax advantages that debt does not.
, Too much debt will decrease a company's volatility.
Relying too heavily on debt can increase the interest rate that a
company must pay on its debt.
Taking on more equity means that a company will be more leveraged.
RATIONALE
The additional debt would increase the associated risk.
CONCEPT
Capital Structure Considerations
Report an issue with this question
3
A security that falls below the security market line has __________.
a low expected return and a low price
a low expected return and a high price
a high expected return and a low price
a high expected return and a high price
RATIONALE
It's stuck below the SML and would have a lower expected return and, therefore, a
higher price at that level of risk.
CONCEPT
Understanding the Security Market Line
Report an issue with this question
4
You own a small manufacturing business that produces widgets. You
have spent $150,000 acquiring the fixed assets you need to produce
widgets. Each widget costs you $2 to make and they sell for $15 each,
so your variable cost is 13.3% of the overall revenue.
