An investment has returned 12%, 4%, -8%, 2%, and 20% in each of the last five years. If we decide to use historical returns as a proxy for expected future returns, what is the expected rate of return? a. 5% Ob. 6% O c. 3% O d. 4% What is the price of a bond with 5 years to maturity, a par value of $1000, coupon rate of 8% and yields 10%? Coupons are paid quarterly. O a. $922.78 O b. $922.05 O c. $924.18 O d. $926.54 You are given two choices: A: You receive $1,000.00 B. You flip a coin. If it lands heads, you receive $2,000.00, but if it lands tails, you get nothing. If you are risk neutral, which would you choose? a. A or B; it doesn't matter O b. cannot determine from the information given O c. A O d. B If an investment is equally like to result in either doubling or halving your investment, what is the expected standard deviation of the investment? a. 25% O b. 75% O c. 50% O d. 100% A firm is expected to pay a $1 dividend next year and the expected share price of the firm next year is $42. If investors require a 12% rate of return, what is the expected share price today? a. $37.50 O b. $39.39 C. $38.39 d. $43 A firm comprised of all equity is not expected to have any FCF for the next 5 years. After that, the FCF is expected to be $120 million and grow by 3% after that. If the required return on equity is 7%, what is the terminal value of the company? a. $2.8 billion O b. $3.8 billion c. $2 billion d. $2.4 billion What is the expected price of a stock with a 10% required rate of return, an expected dividend next year of $1, and an expected dividend growth of 5%? a. $10 b. $20 O c. $21 O d. $15 An investor buys a 5% annual coupon, 5 year bond for $1100. If the YTM is expected to remain constant over the next what return does the investor earn from the coupon payments? year, O a. 2.83% b. -1.72% c. 4.55% d. 5.00% A firm with no debt is expected to have free cash flow of $80 million next year. The firm is comprised of 20% preferred stock and 80% common stock. The WACC is 10% and FCF is expected to grow at 3%. If the firm has 45 million common shares outstanding, what is the expected value of the firm's common stock price? a. $25.40 b. $23.45 c. $19.12 d. $20.32