Financial Markets and Financing Flashcards

1
Q

If two projects are completely and positively linearly dependent (or positively related, the measure of correlation between them is

A

+1

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2
Q

If a firm starts expanding into new product lines, what happens to the beta and the required return on investment in its shares

A

Both will rise

The company will be taking on more risk therefore the beta will rise. Since the beta will rise, the required rate of return with also rise

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3
Q

What forms of short-term borrowing are considered unsecured credit

A

revolving credit, bankers’ acceptances, line of credit, and commercial paper

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4
Q

What is not true about financial markets

A

In perfectly competitive markets, financial intermediaries act as price setters to clear the market.

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5
Q
A
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