If the CAPM Is Used to Estimate the Cost of Equity

question 2

Multiple Choice

If the CAPM is used to estimate the cost of equity capital the expected excess market return is equal to:

• A) the return on the stock minus the risk-free rate.
• B) the difference between the return on the market and the risk-free rate.
• C) the beta times the market risk premium.
• D) the beta times the risk-free rate.
• E) the market rate of return.

Learn to calculate and understand the impact of investment transactions on the balance of Retained Earnings.

Understand the differences between trading securities, available-for-sale securities, and held-to-maturity securities.

Gain insight into the equity method of accounting and its application.

Know how to record adjustments for investments to fair value and their impact on financial statements.

---

Definitions:

Disease

A disorder of structure or function in a human, animal, or plant, especially one that produces specific symptoms or affects a specific location and is not simply a direct result of physical injury.

Psychodynamic Therapy

A form of depth psychology, focusing on the unconscious mind and childhood experiences, and uses this framework to treat mental illness.

Rational-Emotive Therapy

A type of cognitive-behavioral therapy focusing on altering negative thought patterns to overcome emotional and behavioral issues.

Withdrawal Symptoms

Manifestations of physical or psychological nature that emerge when the consumption of a dependent substance is decreased or halted.