Intermediate Financial Management (MindTap Course List)
12th Edition
ISBN: 9781285850030
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Question
Chapter 10, Problem 4MC
Summary Introduction
Case summary:
Person X is decided to start a company relating to software products which integrates a wide range of media devices like laptops, desktop computers, cell phones and digital video recorders. He has selected student body at his university as an initial market.
Once his plans are successful and he will decide to expand its business to other colleges and areas and eventually to go national wide. Later he will plan to go public issue with an IPO to buy a yacht. These points are kept in mind while deciding the potential investors of his company.
To discuss: Type of agency conflict might occur and the steps taken by lenders to mitigate the agency costs, when the company raises funds from outside lenders.
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Students have asked these similar questions
The returns of Asset A and risk-free asset are 20% and 10% respectively. If they are held in proportions of 80% (Asset A) and 20% (risk-free asset) in a portfolio, then the portfolio return is Blank______.
Multiple choice question.
14%
12%
18%
15%
Which of the following is true of a risk-averse investor?
Multiple choice question.
A risk-averse investor invests only in risk-free assets, such as T-bills.
A risk-averse investor avoids investments that have zero expected return.
correct
A risk-averse investor invests in securities that have zero total risk.
A risk-averse investor invests in securities that have zero systematic risk.
Which of the following is true of a risk-averse investor?
Multiple choice question.
A risk-averse investor invests only in risk-free assets, such as T-bills.
A risk-averse investor avoids investments that have zero expected return.
A risk-averse investor invests in securities that have zero total risk.
A risk-averse investor invests in securities that have zero systematic risk.
Chapter 10 Solutions
Intermediate Financial Management (MindTap Course List)
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Similar questions
- The calculation of a portfolio's beta is similar to the calculation of Blank______. Multiple choice question. a portfolio's variance a portfolio's standard deviation the value of a put option a portfolio's expected returnarrow_forwardWhich type of risk does not change when securities are added to a portfolio? Multiple choice question. Unique risk Company-specific risk Systematic risk Unsystematic riskarrow_forwardWhat is the uncertain or risky return on a security? Multiple choice question. It is the portion of the return on a security that depends on unknown information. It is the portion of the return on a security that is unaffected by any present or future information. It is the portion of the return on a security that depends on known information. It is the return on a security that is classified as risky by bond rating agencies.arrow_forward
- The systematic risk principle argues that the market does not reward risks Blank______. Multiple choice question. in any circumstances that are systematic that are borne unnecessarily that are nondiversifiablearrow_forwardWhich of the following types of risk is NOT reduced by portfolio diversification? Multiple choice question. Unsystematic risk Unique risk Systematic risk Neither systematic risk nor unsystematic risk is reducedarrow_forwardA(n) Blank______ investor would prefer to avoid gambles with zero expected return. Multiple choice question. risk-taker risk-averse risk-neutral activearrow_forward
- Historical return data indicate that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio Blank______. Multiple choice question. fluctuates randomly decreases increases does not changearrow_forwardSystematic risk will Blank______. Multiple choice question. decrease when securities are added to a portfolio be eliminated when securities are added to a portfolio not change when securities are added to a portfolio increase when securities are added to a portfolioarrow_forwardWhat are the components of unexpected return (U) in the total return equation? More than one answer may be correct. Multiple select question. The expected return portion The unsystematic portion The expected risk portion The systematic portionarrow_forward
- Which of the following risks are reduced as more securities are added to the underlying portfolio? More than one answer may be correct. Multiple select question. Asset-specific risk Systematic risk Unique risk Market risk Unsystematic riskarrow_forwardWhat is a systematic risk? Multiple choice question. It is a risk that affects only one or a few assets. It is a risk that is caused by the failure of the internal control system of a corporation. It is a risk that pertains to a large number of assets, each to a greater or lesser extent. It is a risk that increases in a systematic, gradual fashion.arrow_forwardThe benefit in risk reduction from adding securities Blank______ as more and more securities are added to a portfolio. Multiple choice question. increases declines remains the samearrow_forward
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