A firm receives a cash flow from an investment that will increase by 10 percent annually for an infinite number of years. This cash flow stream is called:

		an annuity due.
		a growing perpetuity.
		an ordinary annuity.
		a growing annuity.

4 points

Question 44

The true cost of lending is the:

		annual percentage rate.
		effective annual rate.
		quoted interest rate.
		interest rate per period.

4 points

Question 45

A lottery winner was given a perpetual payment of $25,362. She could invest the cash flows at 7.5 percent. What is the present value of this perpetuity? (Round to the nearest dollar.)

		$338,160
		$390,215
		$238,160
		$201,356

4 points

Question 46

In a game of chance, the probability of winning a $50 prize is 40 percent and the probability of losing a $50 prize is 60 percent. What is the expected value of the prize in the game?

		($10)
		$0
		$20
		$25

4 points

Question 47

Gwen purchased a stock one year ago for $25, and it is now worth $31. The stock paid a dividend of $1.50 during the year. What was the stock's rate of return from dividend income during the year?

		6%
		15%
		24%
		26%

4 points

Question 48

Given the historical information in Chapter 7, which of the following investment classes had the greatest variability in returns?

		Intermediate-Term Government Bonds
		Long-Term Government Bonds
		Large U.S. Stocks
		Small U.S. Stocks

4 points

Question 49

If a random variable follows a normal distribution, what is the probability that the random variable is larger than 1.96 standard deviations larger than the mean?

		1.25%
		2.50%
		3.75%
		5.00%

4 points

Question 50

The expected return on Kiwi Computers stock is 16.6 percent. If the risk-free rate is 4 percent and the expected return on the market is 10 percent, then what is Kiwi's beta?

		1.26
		2.10
		2.80
		3.15