answer with short solutions

1.

Assume you think a boom and a recession are equally likely to happen, a 50-50 chance of either.

State of Economy	Probability of State of Economy	Security Returns if State Occurs
		Security L	Security U
Recession	0.50	-20%	30%
Boom	0.50	70%	10%

Based on the above information, what is a standard deviation for Security L?

Select one:

a. 45%

b. 25%

c. 10%

d. 20%

2.

Assume security A has a standard deviation of 32% and security B has a standard deviation of 22%. Is it true to say that security B is more risky than security A?

Select one:

True

False

3.

Assume you think a boom and a recession are equally likely to happen, a 50-50 chance of either.

State of Economy	Probability of State of Economy	Security Returns if State Occurs
		Security L	Security U
Recession	0.50	-20%	30%
Boom	0.50	70%	10%

Based on the above information, what is a standard deviation for Security U?

Select one:

a. 20%

b. 25%

c. 10%

d. 45%

4.

From the list below determine how much is the net operating working capital (NOWC):

Cash	$400
Capital	5,000
Accounts Payable	40
Accounts Receivable	30
Sales	2,000
Tax Payable	120
Salaries Payable	65
Salaries Expense	1,000
Inventory	50
Dividends	44

Select one:

a. $181

b. $440

c. $255

d. $375

5.

You own stock in a firm that has 1,000,000 shares outstanding. The current stock price is $25 per share. If the company issues a 17% stock dividend, what would you expect the stock price to be after the dividend is paid?

Select one:

a. 18.91

b. $32.12

c. $45.67

d. $21.37

6.

If a corporate bond is quoted at 95 that means it is trading at 95% of face value. In the case where the face value is $1000, the cost to buy each bond is $955.

Select one:

True

False

7.

Assume you have a stock that pays a $0.25 dividend every quarter and the required return is 16% with quarterly compounding. What is the price?

Select one:

a. $6.50

b. $6.25

c. $6.75

d. $6.10

8.

Assume you have a bond with a 5% semiannual-pay and a face value of $1,000. This bond will mature in 6 years. If the yield is 7%, what is the price of this bond?

Select one:

a. $903.37

b. $1,005.37

c. $878.86

d. $1,000.00