# help with questions please

**Question description**

a longer holding period gives a more reliable estimate because it is, in effect, a larger sample size. almost all investors hold stocks for many years, so it matches their investment horizon. historical returns are the best indicators of future returns. |

estimating a firm’s total risk to be used in the WACCestimating a firm’s market risk and used with the CAPMestimating the amount of leverage used by the firm |

the required rate of return exceeds the expected rate of return. the expected rate of return exceeds the actual rate of return. the expected rate of return exceeds the required rate of return. |

They include the underwriting spread. They tend to raise the cost of capital. all of the above |

through hedging and insurance, investors may now invest in stocks with almost no risk exposure of any kind. it is easy and almost costless to diversify one’s portfolio and eliminate idiosyncratic risk. investing in bonds can offset the idiosyncratic risks of shares of stock. |

the average cost, including commissions, for raising capital for the firm. an average required return for each of the sources of capital used by the firm to finance its projects, weighted by the amount contributed by each source. interest payments and dividends, divided by the price of bonds and stock, respectively. |

It is always estimated using the present value of future dividends approach. It is estimated by solving for the discount rate for a perpetuity. It is generally lower than the cost of debt because equity holders are paid after taxes are paid. |

expect a higher return for bearing more risk. will pay more for an investment with higher risk. have very high required rates of return. |

Kby one plus the tax rate._{d} multiply K by one minus the tax rate._{d}add 3% to 6% to K._{d}multiply K by the firm’s beta._{d} |

the firm’s beta. Moody’s, Standard & Poor’s, and Fitch ratings. the variability of EBIT. |

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