Using the Capital Asset Pricing Model, the Cost of Ordinary

question 13

Multiple Choice

Using the capital asset pricing model, the cost of ordinary stock equity is the return required by investors as compensation for

• A) the specific risk of the firm.
• B) price volatility of the stock.
• C) the firm's diversifiable risk.
• D) the firm's nondiversifiable risk.

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Definitions:

Protectionist Policies

Protectionist policies are governmental actions and policies that restrict or restrain international trade, often with the intent of protecting local businesses and jobs from foreign competition.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, indicating a net outflow of domestic currency to foreign markets.

Foreign Assets

Assets held in a country by foreign residents and businesses, which can include stocks, bonds, real estate, and other types of investments.

Domestic Investment

Investment in the financial assets and physical infrastructure within a country's own borders.