Question

1. The Capital Asset Pricing Model is used to determine:

1. The total amount of company’s assets
2. The market value of a company
3. The cost of debt capital
4. The cost of equity capital

2. The company’s cost of capital represents:

1. The investor’s minimum required return on investment
2. The total dollar investment within a company
3. The minimum amount of Free Cash Flow a company needs to earn
4. The difference between Net Income and invested capital

3. The market risk premium represents:

1. The difference between the return on the market portfolio and the return on the risk-free rate .
2. The return on the market portfolio.
3. The cost of equity capital for a company.
4. The difference between a company’s cost of equity capital and its cost of debt capital.

Answer 1

Question 1: The cost of equity capital

Question 2: The investor’s minimum required return on investment

Question 3: The difference between the return on the market portfolio and the return on the risk-free rate .