1. Assume that annual returns on common stocks are normally distributed with an average historical return of 13.2% and a standard deviation of 20.3%. What is the probability that annual return on common stocks is negative?

a)

0.2578

b)

0.3498

c)

0.4456

d)

0.6502

e)

0.7422

2.

An investment opportunity has the following cash flows:

End of year	Cash Outflow	Cash Inflow
0 (initial cost)	$5,500
1		$1,000
2		0
3		6,000

The internal rate of return (IRR) of this investment is ..

a)

8.80%.

b)

9.37%.

c)

10.12%.

d)

12.08%.

e)

13.93%.