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Name: On average, the expected return on debt is lower than the expected re
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Description: On average, the expected return on debt is lower than the expected return onequity because equity has greater dispersion (variability) of returns.O TrueFalse

Business

Finance

On average, the expected return on debt is lower than the expected return on equity because equity has greater dispersion (variability) of returns. O True O False

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 9DQ

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Similar questions

Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity?
Evaluate the following statement: If the financial market is frictionless and complete, the asset with higher expected return also exhibits higher return volatility (i.e., standard deviation of returns).
The return and volatility of ________ portfolios are often lower than those of other asset types a. Credit Investing b. Market Analysis c. Fixed Income d. Rate and Return
The appropriate benchmark for the return on equity is: A)the weighted average cost of capital. B)the cost of equity. C)the interest free rate. D)none of the above.
If the duration gap is zero, then the market value of equity is ____________ interest rates.A. increased due to an increaseB. increased due to a decreaseC. decreased due to an increaseD. immunized from changes
Unfavorable leverage means Return of equity more than return of loan cost Return of equity less than return of loan cost O Both of above
If the liquidity preference hypothesis is true, what shape should the term structure curve have in a period where interest rates are expected to be constant?a. Upward sloping.b. Downward sloping.c. Flat.
Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity? How should the capital structure weights are used to calculate the WACC be determined?
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Higher interest rates imply higher required rates of return, which is generally a negative for stock prices a. True b. False
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"Fisher effect defines the relationship between nominal rates, real rates, infiation, default premium, and maturity premium". Is the above statement TRUE? O A. Yes O B. No