The Proposition That the Cost of Equity Is a Positive

question 9

Multiple Choice

The proposition that the cost of equity is a positive linear function of capital structure is called:

• A) the capital asset pricing model.
• B) MM Proposition I.
• C) MM Proposition II.
• D) the law of one price.
• E) the efficient markets hypothesis.

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Definitions:

Validity

The extent to which a test or instrument measures what it is supposed to measure, indicating the accuracy of the results.

Standardized Test

An exam administered and scored in a consistent manner to ensure comparability across different test takers.

Consistent Results

Findings or outcomes from experiments or studies that are repeatedly similar under the same or similar conditions, indicating reliability.

Normal Curve

A statistical concept representing the distribution of a set of data that forms a bell-shaped curve, indicating average scores at the center and deviations spread equally around it.