Suppose the Domestic U

question 70

Multiple Choice

Suppose the domestic U.S.beta of IBM is 1.0,that is ,and that the expected return on the U.S.market portfolio is percent,and that the U.S.T-bill rate is 6 percent.If the world beta measure of IBM is then we can say

• A)That if the U.S.markets are fully integrated with the rest of the world, IBM's cost of equity capital would be 20% lower than if U.S.markets were segmented.
• B)That if the U.S.markets are fully integrated with the rest of the world, IBM's cost of equity capital would be 10% lower than if U.S.markets were segmented.
• C)That if the U.S.markets are fully integrated with the rest of the world, IBM's cost of equity capital would be one-third lower than if U.S.markets were segmented.
• D)None of the above

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Definitions:

Production

The process of creating goods and services through the combination of human labor, materials, and technology.

Cost Estimation

The process of forecasting the costs associated with a project or production, taking into consideration all relevant variables.

Least Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Cost Estimation

The process of predicting the amount of resources, especially financial, required to complete a project or product development within specified constraints.