The Rate of Return on Which One of the Following

question 60

Multiple Choice

The rate of return on which one of the following is used as the risk-free rate?

• A)Long-term government bonds
• B)Long-term corporate bonds
• C)Inflation, as measured by the Consumer Price Index
• D)U.S. Treasury bill
• E)Large-company stocks

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Definitions:

Market Value

Today's market rate for the purchase or sale of services or assets.

Flotation Cost

Costs a company faces when it issues new securities, encompassing fees for underwriting, legal services, registration, and printing.

WACC

A measurement called the Weighted Average Cost of Capital assesses the cost of a business's capital, where every capital category is assigned a proportional weight.

Capital Structure

The particular combination of debt and equity that a company uses to finance its overall operations and growth.