Effective Estate Planning Will Ensure That Your Wealth Is Distributed

question 29

True/False

Effective estate planning will ensure that your wealth is distributed according to your wishes, but will do nothing to reduce the potential taxes your estate is subject to.

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Definitions:

SML Approach

Refers to the Security Market Line approach, a graphical representation of the Capital Asset Pricing Model (CAPM), showing the relationship between the expected return of a security and its beta (systematic risk).

Cost of Equity

The return a company needs to generate on its equity investments to compensate its shareholders for taking on the risk of investing.

After-Tax Cost of Debt

The net cost of debt to a company after accounting for the tax deductions on interest expenses.

Market Rate of Interest

The prevailing rate of interest observed in the marketplace for securities of similar risk and maturity.