Question
13) Amy bought a share of stock for $64.50 that paid a dividend of $.50 and sold nine months later for $64.00. What was her
13) Amy bought a share of stock for $64.50 that paid a dividend of $.50 and sold nine months later for $64.00. What was her dollar profit or loss and holding period return? 13) ______
A) -$0.50, -0.78%
B) $0.50, 0.78%
C) $0.00, 0.00%
D) There is no correct solution to this question.
14) Richard owns the following portfolio of securities. What is the beta for the portfolio?
Company | Beta | Percent of Portfolio |
Apple | 2.50 | 25% |
Wells Fargo | 0.65 | 50% |
Ebay
| 1.70 | 25% |
A) 1.62
B) 1.00
C) 1.38
D) 0.65
15) Assume the following information about the market and JumpMasters' stock. JumpMasters' beta = 1.50, the risk-free rate is 3.50%, the market risk premium is 10.0%. Using the SML, what is the expected return for JumpMasters' stock?
A) 13.50%
B) 7.50%
C) 18.50%
D) 27.00%
16) Given the expected returns and probabilities of various states of the world in this table, what is the expected return for Carbide Company?
Carbide Company
State of the Economy
| Probability of State | Return on State |
Boom
| .30 | 18% |
Steady
| .55 | 10% |
Recession
| .15 | -5% |
A) 5.50%
B) 10.15%
C) -0.75%
D) 5.40%
17) Geronimo, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Geronimo uses the net present value method and has a discount rate of 11%. Will Geronimo accept the project? 17) ______
A) Geronimo rejects the project because the NPV is about -$2,375.60.
B) Geronimo rejects the project because the NPV is about -$12,375.60.
C) Geronimo rejects the project because the NPV is about -$22,375.73.
D) Geronimo accepts the project because the NPV is greater than $10,000.00.
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