Consider the Following Equation for the Question(s)below

question 90

Multiple Choice

Consider the following equation for the question(s) below:
E + D = U = A
-Which of the following statements is FALSE?

• A)The unlevered beta measures the market risk of the firm without leverage, which is equivalent to the beta of the firm's assets.
• B)When a firm changes its capital structure without changing its investments, its levered beta will remain unaltered, however, its asset beta will change to reflect the effect of the capital structure change on its risk.
• C)If a firm holds $1 in cash and has $1 of risk-free debt, then the interest earned on the cash will equal the interest paid on the debt. The cash flows from each source cancel each other, just as if the firm held no cash and no debt.
• D)The unlevered beta measures the market risk of the firm's business activities, ignoring any additional risk due to leverage.

---

Definitions:

Ligand-Gated

Referring to ion channels that open in response to the binding of a chemical messenger (ligand), such as a neurotransmitter.

Acetylcholine

A neurotransmitter involved in many functions including muscle movement, heart rate, and the modulation of brain activity.

GABA

Gamma-Aminobutyric Acid, an inhibitory neurotransmitter in the central nervous system that plays a key role in reducing neuronal excitability throughout the nervous system.

Receptor Downregulation

A decrease in the number of receptors on the surface of target cells, often in response to high levels of a hormone or neurotransmitter.