Does anybody have BUS 401 Week 4 quiz and answers I need it ASAP

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week_4_only_6_quiz_questions_need_answers.doc

Using the Capital Asset Pricing Model, estimate the required rate of return for Caterpillar Incorporated stock if the company’s beta is 1.87 (as of February 1, 2013). Use a risk-free rate of 3% and a market risk premium of 6%. (Points : 1)

      image1.wmf 8.61%       image2.wmf 11.22%       image3.wmf 14.22%       image4.wmf 16.83%

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Question 3. 3. One reason why we are not concerned with idiosyncratic risk (also called firm-specific risk) is that: (Points : 1)

      image11.wmf most risk is not firm-specific, so we can ignore it.       image12.wmf through hedging and insurance, investors may now invest in stocks with almost no risk exposure of any kind.       image13.wmf it is easy and almost costless to diversify one’s portfolio and eliminate idiosyncratic risk.       image14.wmf investing in bonds can offset the idiosyncratic risks of shares of stock.

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Weights used in calculating the WACC should: (Points : 1)

      image16.wmf sum to 1.00.       image17.wmf always include Wd.       image18.wmf be based on the book value of each source of financing.       image19.wmf be calculated according to the price of each security—so if the price of a bond is $1,000, and the price of common stock is $50, then the weight of debt would be .20.

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MultipleChoice

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Question 6. 6. Beta is estimated as the slope of a regression line fit to pairs of periodic returns, (rx, ry), where: (Points : 1)

      image26.wmf rx is the return for a market index such as the S&P 500 Index.       image27.wmf rx is the return for the stock being analyzed—for example, IBM’s return if we are estimating IBM’s beta.       image28.wmf the slope measures the average return for the market portfolio for each percentage change in the value of the security of interest.       image29.wmf ry is the return for the market index such as the S&P 500 Index.

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firm just paid a dividend equal to $4.00 a share, then for the WACC, in order to find the cost of equity, $4 should be: (Points : 1)

      image31.wmf divided by the current price of the stock, and the quotient should be added to the dividend growth rate.       image32.wmf divided by the current price of the stock.       image33.wmf multiplied by one minus the tax rate, and the difference divided by the current price of the stock.       image34.wmf multiplied by the sum of one plus the growth rate, and then divided by the current price of the stock; this quotient should be added to the dividend growth rate.

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Which of the following statements regarding the cost of preferred stock is true? (Points : 1)

      image37.wmf It is typically found by solving for an annuity’s discount rate.       image38.wmf It is typically found by solving for an annuity due’s discount rate.       image39.wmf It is found similarly to a perpetuity’s discount rate but with irregular spacing of the dividends.       image40.wmf It is typically found by solving for a perpetuity’s discount rate.image41.wmf

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MultipleChoice

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