Financial Markets and Financing Flashcards
If two projects are completely and positively linearly dependent (or positively related, the measure of correlation between them is
+1
If a firm starts expanding into new product lines, what happens to the beta and the required return on investment in its shares
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
What forms of short-term borrowing are considered unsecured credit
revolving credit, bankers’ acceptances, line of credit, and commercial paper
What is not true about financial markets
In perfectly competitive markets, financial intermediaries act as price setters to clear the market.