Question 6

The square of the standard deviation is called the:

Select one:

a. Average rate of return.

b. Excess return.

c. Probability range.

d. Risk premium.

e. Variance.

Question 7

Diversification will reduce the non-systematic risk of your portfolio.

Select one:

True

False

Question 8

A firm must make its dividend payments common shareholders before it makes any dividend payments to its preferred shareholders.

Select one:

True

False

Question 9

Given a tax rate of 15% for income up to $50,000, a tax rate of 25% for income between $50,001 and $75,000, and a tax rate of 34% for income between $75,001 and $100,000, and a tax rate of 39% for income above $100,001, if ABC Inc. reports taxable income of $200,000. How large is this firm's tax bill?

Select one:

a. $78,000

b. $61,250

c. $67,000

d. $48,750

e. $91,125

Question 10

Which of the following is correct regarding agency costs?

Select one:

a. Direct costs occur when managers, acting to minimize the risk of the firm, forego investments shareholders would prefer they take

b. Direct costs occur when managers, acting to minimize the risk of the firm, forego investments shareholders would prefer they take.

c. Indirect costs occur when managers buy assets considered unnecessary by the firm's owners.

d. Company paid club memberships for executives are an example of direct agency costs.

e. Indirect costs occur when shareholders must incur costs to monitor the manager's actions.