1.Company Que is a publicly listed company and plans to issue additional equity to investors to finance one of its companys projects. The new issuance of security is known as(3 Points)

1. initial public offering of stocks
2. seasoned stocks offering
3. initial public offering of bonds

2.Based on question 1, the security issuance of company Que will take place in(2 Points)

1. primary market
2. secondary market
3. money market

3.When investors sell stocks at the marketplace to liquidate their positions, the transactions take place in(2 Points)

1. primary market
2. secondary market
3. money market

4.Credit card issuers must by law print the annual interest rate they charged borrowers. If the annual interest rate is stated to be 15%, with interest paid monthly, what is the actual annual cost that the bank charges its customers on the card?(5 Points)

1. 15.00%
2. 16.07%
3. 15.85%
4. 16.25%

5.Your bank account pays a nominal interest rate of 8%, compounded quarterly. You deposit $500 in the account today, and deposit $1,000 in the account at the end of the first year. How much will you have in the account at the end of the first year?(6 Points)

1. $1,540
2. $1,623.60
3. $1,461.90
4. $1,462.95
5. $1,541.20

6.An analyst believes that economic conditions during the next year will either be strong, normal, or weak, and she thinks that the Corrigan Company's returns will have the following probability distribution.

Conditions Probability (%) Return (%)

Strong 30 30

Normal 40 15

Weak 30 -10

What is Corrigans expected return?(4 Points)

1. 12.00%
2. 11.67%
3. 18.33%

7.What is Corrigans standard deviation of returns?(4 Points)

1. 13.20%
2. 15.68%
3. 10.10%

8.The difference in returns between Treasury bills and the FTSE Bursa Malaysia (FBM) KLCI is 5.50%. The Treasury bill rate is 3% . Krogh Enterprise has a beta of 1.60. What's the market return?(4 Points)

1. 8.50%
2. 5.50%
3. 2.50%

9.What is the required rate of return of Krogh Enterprise?(4 Points)

1. 11.80%
2. 7.00%
3. 16.60%

10. Which of the following stocks is more risky?

Stock J Stock E

Return 19% 15%

Standard deviation of return 13% 11%(4 Points)

1. Stock J
2. Stock E
3. cannot determine due to insufficient information

11.You own a portfolio consisting of 35% Treasury bills and 65% stock Q. The return for Treasury bills is 3%. Stock Q has a return of 8% and a standard deviation of return of 5%. What's the portfolio return?(3 Points)

1. 6.25%
2. 5.50%
3. 8.00%

12.What's the portfolio risk?(3 Points)

1. 5.00%
2. 3.25%
3. 1.75%

cannot determine due to insufficient information

13.You are given information on two stocks. Stock AXE has a required return of 12.25% and analysts expected the stock to provide a return of 13%. The beta of AXE stock is 1.15. Stock NIP has a beta of 1.6 and analysts expected the returns of Stock NIP to be 14%. The risk-free rate is 5%. What is the market risk premium?(4 Points)

1. 11.30%
2. 6.30%
3. 7.25%
4. 9.00%

14.What is the required return of Stock NIP?(4 Points)

1. 15.08%
2. 23.08%
3. 8.60%
4. 11.40%

15.Which of the two stocks would you purchase and why?(3 Points)

1. Stock NIP because it is overvalued
2. Stock NIP because it is undervalued
3. Stock AXE because it is overvalued
4. Stock AXE because it is undervalued