1. The cost of capital is:
a. the minimum required return on a new investment.
b. another term for the market risk premium.
c. the return on the overall market.
d. another term for the risk-free rate of return.
e. the maximum cost of issuing a new security.
2. Which one of the following is an example of systematic risk?
a. an increase in federal tax rates
b. employee walkout in protest of a firm's promotion policies
c. surprise firing of a firm's chief financial officer
d. acquisition of a competitor by a retail firm
e. layoffs by a major retailer