1. A company recently acquired an equipment with a useful life of 5 years. It has an initial cost of $1 million and expected annual cost of $50,000 on years 1 to 5. The tax rate is 25% and the discount rate is 15%. The equipment will be depreciated using the straight line method. What is the annual depreciation tax shield?

Select one:

a. None of THESE

b. $150,000

c. $50,000

d. $200,000

2. A one year GIC certificate has a real interest rate of 2%. If the inflation is rate is 1%, what is the exact value of the nominal interest rate?

Select one:

a. 3.00%

b. 2.98%

c. 3.02%

d. 0.99%

e. None of THESE

3. Stock A has a standard deviation of 10% and stock B has a standard deviation of 16%. Both stocks have a correlation coefficient of zero and the same expected return of 8%. If the two stocks are combined equally in a portfolio, what would be the portfolio standard deviation?

a. 8%

b. 13%

c. 9.43%

d. 11.36%