Question 1.

Discuss the Trade-off model and explain its components and the theory behind it. What does that model say to us regarding the optimal capital structure of the firms? (900 words)

Question 2.

List and explain by using relevant examples at least five of the factors affecting the capital structure decisions. (900 words)

Question 3. (900 words)

The Capital Asset Pricing Model (CAPM) is the most researched as well as critically examined technique in the field of finance. The concepts of Security Market Line (SML) and Capital Market Line (CML) are employed as tools for the estimation of expected return on Securities and Portfolios.

• Explain and discuss the CAPM model. (20 marks)

• List and explain the assumptions made by the model. (10 marks)

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