If a company's stock is perceived to be more risky than average, what will happen to their equity cost of capital? Explain using the capital asset pricing model
What will be an ideal response?
A stock that is more volatile (riskier) than the market average will have a beta of greater than 1. This means that the return that stockholders will require will be greater than average [kj = Rf +?(km - Rf)]. In other words, the company will have to pay stockholders more since they must take a greater risk, and the equity cost of capital will rise.
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A) decrease; frictional B) increase; frictional C) increase; cyclical D) decrease; cyclical
If Microsoft sells a bond in London and it is denominated in dollars, the bond is a
A) Eurobond. B) foreign bond. C) British bond. D) currency bond.
Protectionism arises because
a. people misunderstand the benefits of free trade b. trade generally harms some groups in society c. the costs of free trade outweigh the benefits for all groups in society d. the costs of trade for both exporting and importing nations outweigh the benefits e. of a lack of comparative advantage
The Great Depression began in
A. the second half of 1929. B. the middle of 1930. C. early 1932. D. March 1933.