Junk Bonds ________

question 19

Multiple Choice

Junk bonds ________.

• A)are paid with the highest interest rates
• B)are typically rated in the A or B category
• C)are relatively safe investments
• D)are backed by insurance policies

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Definitions:

CAPM

Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets.

Target Capital Structure

The mix of debt, equity, and other financing sources a company aims to use to fund its operations and growth.

Market Risk Premium

The additional financial return an investor aims to achieve by having a risky market portfolio instead of investments that are risk-free.

WACC

Weighted Average Cost of Capital, a calculation of a firm's capital cost that weighs each category of capital (equity, debt) proportionately.