1. Which of the following best describes the risk measure known as beta?
A. A measure of efficient frontier.
B. A measure of state dependent returns.
C. A measure of risk that cannot be diversified away by conforming portfolios.
D. A measure of the expected return of the market.
2. Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49 percent.
What is the firm's weighted average cost of capital if the tax rate is 34 percent?
A. 14.19%
B. 13.44%
C. 12.69%
D. 14.47%