1A)

You need to save $2970 in your account so that you can buy that new laptop you've had your eye on. You currently only have $1302 in your savings account. You commit to adding $285 per month to your account until you have enough. You can earn on average 10.8% (APR) in your account (compounded monthly). How many months will you need to work before you have enough to buy the laptop?

a. -1.49

b. 1.5

c. 5.5

d. 14.0

e. 13.3

1B)

You bought a Picasso 14 years ago for $247812 and it is now worth $303511 according to a recent report by a Sotheby's appraisal team. What is the average annual rate of appreciation your painting has experienced each year for the last 14 years (assume the rate has remained constant)? (Round your answer to 2 digits)

a. 0.40

b. 0.45

c. 2.33

d. 1.46

e. 2.65

1C)

You are currently evaluating a potential stock purchase. As you are gathering information about the stock you notice a few things. First, you see that the expected rate of return on the market is 12%, and the risk free rate is 5%. The stock you are interested in has a beta of 2.6, and is currently priced to yield a return on 20% (expected return). If this is true then, what must also be true?

a. The stock lies above the SML

b. The stock lies on the SML

c. The stock is overpriced

d. The stock is underpriced

e. The stock is fairly priced

ANSWER