If the standard deviation of the S&P 500 return is 22%, and the long-term mean return is 12%, is a stock more or less risky than the S&P 500 if it a mean return of 50% and a standard deviation of 50%.

Explain your response.

What is the weighted average cost of capital (WACC) and provide the equation when long-term debt and common equity are used to obtain capital funds?

Describe each component and how you measure each? How does a higher beta affect WACC and why?

What is the WACC for a public utility given the following information: beta: 0.8, expected rate of return on the S&P 500: 12.4%, risk-free rate (T-bill yield): 4%, yield to maturity on long-term bonds: 7.2%, required rate of return on preferred stock: 7.5%, common equity ratio: 60%, debt ratio: 30%, preferred stock ratio: 10% and an effective corporate tax rate: 30%.

Answer rating: 100% (QA)

The basic rule of finance is that more the risk more the return Therefore the stock ... View the full answer