Chapter 12 Risk, Cost of Capital, and Capital Budgeting 1. The best fit line of a pairwise plot of the returns of the security against the market index returns is called the: a. Security Market Line. b. Capital Market Line. c. characteristic line. d. risk line. e. None of these. Answer: c Difficulty level: Medium
Topic: CHARACTERISTIC LINE [Question] 2. The weighted average cost of capital for a firm is the:
Difficulty level: EasyTopic: WEIGHTED AVERAGE COST OF CAPITAL 3. Using the CAPM to calculate the cost of capital for a risky project assumes that: Difficulty level: Medium
Topic: CAPM Scrambling: Locked [Question] 4. Beta measures depend highly on the:
Difficulty level: EasyTopic: BETA
