1. You are saving for your child's university education. It is her 1st birthday today. She will start university just after her 19th birthday. You are going to save $2,000 per year each year starting today and ending on her 18th birthday. If you expect to earn a rate of 5% in the savings account, then how much will you have saved by her 19th birthday? $56,264.77 $59,078.01 $61,078.01 $64,131,91 $54,264.77

2. Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The expected return on the market portfolio is 9.75%. The corporate tax rate is 40%. The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling. The coupon rate on Cadbury's bonds is 4.5%. Assume that the bonds pay annual coupons. The yield to maturity on Cadbury's bonds is 4.5%. Cadbury's bonds mature in 7 years. Cadbury has 1.650 billion common shares outstanding. The market price of Cadbury's common shares as of Dec 31, 2008 is 6.25 pounds sterling. Cadbury's Beta is 0.8. What is the capital structure weight for equity? 0.149 0.192 0.808 0.851 0.862

3. Initech has 7 million shares of common stock outstanding and 50,000 bonds outstanding. The bonds pay semi-annual coupons at an annual rate of 9.05%, have 6 years to maturity and a face value of $1,000 each. The common stock currently sells for $30 a share and has a beta of 1. The bonds sell for 94% of face value and have a 10.42% yield to maturity. The market risk premium is 5.5%, T-bills are yielding 5% and the tax rate is 30%. What is the firm's capital structure weight for debt? 18.3% 19.3% 20.3% 21.3% 22.3%

4. In a well-diversified portfolio, the most relevant type of risk to a well-diversified investor is interest rate risk. unsystematic risk. market risk. exchange rate risk. firm-specific risk

5. When buying foreign currency, you can expect to receive the rates quoted on the internet. True False

6. The increased risk of doing business in a foreign country can be offset by: Lack of growth. Arbitrage. Diversification. Expropriation. 7. As long as the flow of currencies is ________, the exchange rate can remain ________. out of balance; constant equal; in flux there is no relationship between the two equal; constant