Assume the foreign exchange rate for the euro was US $1.00 €1.13 last month. This month, the exchange rate is US $1.00  €1.09. This information indicates that over the past month the

(a) US dollar remained unchanged relative to the euro.

(b) US dollar appreciated relative to all foreign currencies.

(c) euro appreciated relative to the dollar.

(d) euro depreciated relative to the dollar.

 Assume that the S&P 500 composite stock index is 995.50. This means that

(a) the average stock in the index is selling for $99.55.

(b) an investor would have to pay $995.50 to purchase one share of each of the stocks represented in the index.

(c) the market values of the stocks in the index increased by a factor of 99.55 since the 1941-1943 base period.

(d) the share prices of the stocks in the index have risen 995.50 times since 1941.

 Which one of the following statements concerning interest is correct?

(a) A five-year investment paying 6% simple interest will provide a higher total return than a comparable investment paying 6% compound interest.

(b) A $100 investment paying 5% interest compounded annually will have a total value of $115 at the end of three years.

(c) The less frequently interest is compounded, the higher the true rate of interest.

(d) An investment paying 7% compounded quarterly will have a larger value at the end of one year than a comparable investment paying 7% compounded annually.

 The risk-free rate of return is 4% while the market rate of return is 11%. Delta Company has a historical beta of 1.25. Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company. The new beta is 1.38. What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta?

You are an analyst at Dewey, Cheatum, and Howe. A mutual fund manager presents the following free cash flow data for XYZ Corp (in millions of $).

Year  Cash Flow

2011   300

2012   500

2013   600

2014   700

2015   500

She asks you to please calculate the:

Geometric Total Return

Annualized Rate of Growth in cash flow

Then, the mutual fund manager asks you to make a 10 year forecast based upon the annualized rate of growth.

Finally, she asks you to calculate the present value of the forecasted cash flows assuming a weighted average cost of capital of 8%.