1. Which of the following best describes the risk measure known as beta?

A. A measure of efficient frontier.

B. A measure of state dependent returns.

C. A measure of risk that cannot be diversified away by conforming portfolios.

D. A measure of the expected return of the market.

2. Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The company also has 350 corporate bonds, each with $1000 par value, and the bond currently sells for 102 percent of face. The yield-to-maturity on the debt is 8.49 percent.

What is the firm's weighted average cost of capital if the tax rate is 34 percent?

A. 14.19%

B. 13.44%

C. 12.69%

D. 14.47%