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arushi_13
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Joined: 09 Feb 2008
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Posts: 1235

Posted: 01 Feb 2009 at 02:05 \| IP Logged

Q1.When a Co. increases its degree of financial leverage :
a. The equity beta of the Co. falls
b. The systematic risk of the Co. falls
c. The unsystematic risk of the Co. falls
d. The Standard deviation of returns on the equity of the Co. rises.

Correct ans: D

Q2.If nominal interest rates increase substantially but expected future earnings and dividend growth for a firm over the long run are not expected to change, the firm's stock price will

Correct ans: decrease

Please explain why in both the Qs.

Thanks for your help.

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