Question

Ponts total for this section. 1) Debt is generally the least expensive source of capital. This is primarily due to A) the tax deductibility of interest payments. B) the secured nature of a debt obligation. C) its position in the priority of claims on assets and earnings in the event of liquidation. D) fixed interest payments. 2) If you expect the market to decrease which of the following portfolios should you purchase? A) A portfolio with a beta of-0.5. B) A portfolio with a beta of 1.9. C) A portfolio with a beta of 0. D) A portfolio with a beta of 1.0 3) The most expensive source of capital is usually A) common stock. B) long-term debt. C) preferred stock. D) short-term debt- 4) Madison was hired to design and decorate the offices of a large pharmaceutical company. She accidentally read a report indicating that a new drug had just been approved by the Food and D Administration. She immediately bought the company's stock which doubled in price over the following week. This outcome is inconsistent with A) the semi-strong form efficient market hypothesis. B) the strong form efficient market hypothesis. Her action was probably illegal. C) the weak-form efficient market hypothesis. D) all of the above. Which of the following has a beta of 1? A) The Dow-Jones Industrial Average B) The 10 year T-Bond C) The market D) The 1 year T-Bill