1. Which one of the following will decrease the after-tax cost of debt for a firm?
an increase in tax rates
changing the firm's bond rating from A to B
an increase in the risk-free rate of return
an increase in the risk level of the firm
2. The beta of a diversified portfolio is equal to the _____ of the betas of the individual securities that comprise the portfolio.
arithmetic average
summation
weighted average
geometric average