jgeorgesyouLv1in Finance·35mTrue or False: Shareholders demand and deserve higher expected rates of return than bondholders do. Therefore, debt is the cheaper capital source. We can reduce the WACC by borrowing more.
jgeorgesyouLv1in Finance·36mTrue or False: MM's proposition II assumes increased borrowing does not affect the interest rate on the firm's debt.
jgeorgesyouLv1in Finance·37mTue or False: In a perfect capital market, minimizing the weighted average cost of capital is equivalent to maximizing the firm's value.
jgeorgesyouLv1in Finance·40mTue or False: As long as the firm is certain that the return on assets will be higher than the interest rate, an issue of debt makes the shareholders better off.
jgeorgesyouLv1in Finance·41mTue or False: If firms did not have limited liability, their asset risk would be increased.
jgeorgesyouLv1in Finance·23hA put and a call on the same underlying security have the same maturity and exercise price. If they also sell for the same price, prove which one is in the money.
jgeorgesyouLv1in Finance·24hIn a Modigliani-Miller world with no taxes, does de-leveraging recapitalizations (issuing equity and using the proceeds solely to retire debt) increase the stock price?
jgeorgesyouLv1in Finance·24hCan you earn excess returns trading on rumors about a merger? Why or why not?
jgeorgesyouLv1in Finance·24hIf two assets have zero covariance, can they still be used to diversify each other even if the CAPM holds?
jgeorgesyouLv1in Finance·24h Is the price of oil a systematic risk factor, and what is your reasoning?