Question
1. Stock W has the following returns for various states of the economy: State of the Economy Probability Stock W's Return Recession 25% -22% Average
1. Stock W has the following returns for various states of the economy:
State of the Economy Probability Stock W's Return
Recession 25% -22%
Average 55% 16%
Boom 20% 35%
Stock W's expected rate of return is
2.
Beginning with an investment in one companys securities, as we add securities of other companies to our portfolio, which type of risk declines?
a.Market risk
b.Systematic risk
c.Diversifiable risk
d.Non-diversifiable risk
3.
Temple-Midland, Inc. is issuing a $1,000 par value bond that pays percent annual interest and matures in 15 years. Investors are willing to pay $950 for the bond and Temple faces a tax rate of 35 percent. What is Temple's after-tax cost of debt on the bond?
6.80%
6.30%
5.10%
5.60%
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