A given stock has a beta14 if the risk-free rate is 3 and, Financial Management

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A given stock has a beta14 if the risk-free rate is 3 and

1. Which of the following statements is true?

a. In the Modigliani and Miller model, the firm's interest tax shields are discounted at the firm's required return on debt.

b. The value of a levered firm will always be less than the value of an unlevered firm

c. Issuing new debt with a lower coupon rate will increase the value of a firm's tax shields

d. Most firms' debt has a beta of zero because it is risk free.

e. The value of a levered firm will always be greater than the value of an unlevered firm.

2. A given stock has a beta=1.4. If the risk-free rate is 3% and the expected market return is 9%, what is the expected return of the stock? (according to the CAPM)

A. 11.4%

B. 8.4%

C. 12%

D. 9%

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