3) What is the expected return on an asset with a beta of 2.0, if the risk-free rate of interest is 5% and the expected return on the market portfolio is 10%?

a. 12.5%

b. 20%

c. 10%

d. 15%

4) Assume the current share price of Company A is $4.50 and on the following day these shares will begin trading ex-dividend. If the dividend is 40 cents per share fully franked, and the company tax rate is 30 per cent, what is the expected ex-dividend share price?

a.$4.10

b.$4.50

c.$3.93

d.$4.03

5) A constant payout policy for dividends involves:

a. a constant total amount of dividends paid each year.

b. a constant ratio of dividends to profit and a constant amount of dividends paid from year to year.

c. consideration given to profitable investment proposals.

d. a constant ratio of dividends to profit but not a constant amount of dividends paid from year to year

6) Under what conditions can a company's current capital structure be used to calculate the weights for each source of funds?

a.When implementing a new project will alter a company's capital structure

b.When implementing a new project is not expected to alter a company's capital structure

c.When reliable market weights can be obtained

d.Only when preference shares are not included in the measure for WACC

7)The higher the _____________, the higher the financial risk, and the higher the ____________.

a.Interest rate, business risk

b.Financial leverage, operating risk

c.Financial leverage, cost of capital

d.Fixed operating cost, financial risk