Analysts have provided you the following forecasts for the economy and Stock A: (1) the probability of having a recession next year is 30 percent, a normal economy is 55 percent, and an expansion is 15 percent, and (2) the returns of Stock A will be -25% if the economy is in recession, 25% if the economy is normal, and 50% if the economy is in expansion. What is the ex-ante standard deviation of Stock As returns?

a) 7.17%

b) 13.75%

c) 37.08%

d) 26.78%

Suppose an investor has $50,000 to invest in a portfolio of risk-free asset and the market index/portfolio. The expected return on the market portfolio is 13.5 percent with a standard deviation of 18 percent. The risk-free rate return is 4.25 percent. How much of the funds should be in the risk-free asset if the portfolio has an expected return of 10 percent?

a) 2,125

b) 0.622

c) 1,8918.50

d) 31,081.50

Assume an investor needs $100,000 in cash to invest. Her bank offers a loan with 9% quoted rate, and 10% compensating balance that earns 2.0% interest. What is the effective interest rate on the loan if the interest is compounded monthly?

a) 10.23%

b) 9.89%

c) 10.47%

d) 8%

Assume that IKO Ent has to purchase a Windows system and has approached two suppliers of the system. Supplier A offers a selling price of $72,000 with terms of 2.5/10 net 45, while Supplier B offers $75,000 with 3/15 net 60. Which supplier should IKO Ent purchase the system from if it cannot take advantage of the discount?

a. Buy from supplier A because it offers a lower selling price of $72,000

b. Buy from supplier B because it has a higher discount of $2250

c. Buy from supplier A because it has effective annual cost of 30.22%.

d. Buy from supplier B because it has effective annual cost of 28.02%.