Question 1: The cost of equity for Ryan Corporation is 8.4%. If the expected return on the market is 10% and the risk-free rate is 5%, then the equity beta is ___
Question 2. The beta of a firm is more likely to be high under what two conditions?
- high cyclical business activity and low operating leverage
- high cyclical business activity and high operating leverage
- low cyclical business activity and low financial leverage.
- low cyclical business activity and low operating leverage
- None of the above.
Question 3. Beta is useful in the calculation of the
- company's variance.
- company's discount rate.
- company's standard deviation.
- unsystematic risk.
- company's market rate.
Question 4. Style portfolios are characterized by
- their stock attributes; P/Es less than the market P/E are value funds.
- their systematic factors, higher systematic factors are benchmark portfolios.
- their stock attributes; higher stock attribute factors are benchmark portfolios.
- their systematic factors, P/Es greater than the market are value portfolios.
- There is no difference between systematic factors and stock attributes.
Question 5. Comparing two otherwise equal firms, the beta of the common stock of a levered firm is ____________ than the beta of the common stock of an unlevered firm.
- equal to
- significantly less
- slightly less
- greater
- None of the above.