1. Which of the following statements is FALSE?
A positive investment in a security can be referred to as a long position in the security.
The efficient portfolios are those portfolios offering the lowest possible level of volatility for a given level of expected return.
It is possible to invest a negative amount in a stock or security (called a short position).
A short sale is a transaction in which you buy a stock that you do not own and then agree to sell that stock back in the future.
2. The weighted average cost of capital for a company:
A) Remains constant when the debt-equity ratio changes.
B) Is equivalent to the after tax cost of the firm's liabilities.
C) Is unaffected by changes in corporate tax rates.
D) Is the required return to investors.