1. Which of the following variables does not impact the aftertax cost of debt for a firm??

	a.	The default risk of the firm.
	b.	The marginal tax rate paid by the firm.
	c.	The bottom up beta.
	d.	The current level of interest rates.

2. Which of the following is the lowest investment grade bondrating?

	a.	BBB
	b.	B
	c.	A
	d.	BB

3. Which of the following is usually true concerning the cost ofcapital (the weighted average cost of capital or WACC)?

	a.	The Weighted Average Cost of capital should be consideredconstant over time and does not change with market conditions orchanges in the firm.
	b.	The WACC (or cost of capital) is generally less than the cost ofdebt.
	c.	The WACC (or cost of capital) is generally less than the cost ofequity.
	d.	It does not matter if you use market values or book values forthe amounts of each type of financing.

4. If evaluating the results of a regression, which of thefollowing is the best indicator that the independent variable isstrongly correlated to the dependent variable?

	a.	A T-Statistic of 1 with a p value of .4 associated with thecoefficient on the independent variable.
	b.	A high standard error on the estimate of the slope of theline.
	c.	A T-Statistic of 4 with a p-value of .001 associated with thecoefficient on the independent variable.
	d.	An R squared value of .45

5. The capital Asset pricing model measure the sensitivity ofthe firm to which of the following types of risk?

	a.	Industry specific Risk.
	b.	International Risk.
	c.	Market Risk.
	d.	Firm Specific Risk.