[09:40, 2021-04-22] Dev Shah: Which statement best characterizes economic events such as inflation, recession, and high interest rates? a. They are systematic risk factors that can be diversified away.

b. They are company-specific risk factors that can be diversified away.

c. They are risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers.

d. They are among the factors that are responsible for market risk. [09:46, 2021-04-22] Dev Shah: Question 21

Below are some statements about the Modigliani and Miller (MM) theories on capital structure. Which statement is correct?

According to MM, in a world without taxes, the optimal capital structure for a firm is approximately 100% debt financing.

MM shows that in a world with taxes, a firms value is not affected by its capital structure.

In a world with no taxes, MM shows that a firms capital structure does not affect the firms value. However, when taxes are considered, MM show a negative relationship between debt and value, i.e., its value falls as its debt is increased.

MM shows that in a world without taxes, a firms value is not affected by its capital structure.