Question
1. A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability
1. A stock has returns of 3%, 18%, -24%, and 16% for the past four years. Based on this information, what is the 95% probability range for any one given year?
a) -8.4 to 11.7%
b) -16.1 to 22.6%
c)-24.5 to 34.3%
d)-35.4 to 41.9%
e) -54.8 to 61.3%
2. Johnson Tire Distributors has an unlevered cost of capital of 12 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $1,400. The company has $2,700 in bonds outstanding that have a 6 percent coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?
a)12.43 percent
b)13.81 percent
c) 8.28 percent
d) 9.66 percent
e) 11.05 percent
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