1)    What is the most likely explanation for a 30% return on a stock with a beta of 1

1)    What is the most likely explanation for a 30% return on a stock with a beta of 1.0 in a month when the market returned 12.5%?

A.

The market is undervalued

B.

The stock is aggressive

C.

The beta is really 0.5

D.

Favorable firm-specific (idiosyncratic) news was reported

1.     To calculate the present value of a business, the firm's free cash flows should be discounted at the firm's

A.

Pre-tax cost of debt

B.

Weighted-average cost of capital

C.

CAPM-derived cost of equity

D.

Weighted-average cost of debt

1.     A security's total risk is composed of its___ and ___

A.

Beta and idiosyncratic risk

B.

Beta and market risk

C.

Specific risk and firm-specific risk

D.

Aggressive risk and defensive risk

Which of the following actions will increase a firm's cash balance, all else equal.

A.

Purchase of a new equipment

B.

Issuance of debt

C.

A decrease in accounts payable

D.

An increase in inventory