Five MCQ

All coefficients in the following regressions are statistically significant. Which one of these regressionsrepresents a sensible choice in adjusting the respective multiples?

A. EV/Sales=2+(4*WACC)+(3*ATOM)

B. PS=5+(6*beta)

C. PE=20+(3*beta)

D. PB=1+(2*ROE)

A risky corporate bond is currently trading at $80 and is going to be worth either $100 or $40 next year. At the same time, a zero-coupon risk-free government bond with a face value of $100 is trading at $100. Consider stock A which is going to be worth either $75 or $15 next year. What is the no-arbitrage value today of stock A?

Group of answer choices

A. $25.

B. $20.

C. $45.

D. it is impossible to price stock A.

E. $55.

Consider the following risk-free government bonds with fixed coupons that are paid annually at the end of every year. None of these bonds has any callable or puttable features. Assume that the t=0 coupon has already been paid. The table below reports coupons, market prices, face values and the time to maturity for each bond. Assume that investors can freely buy and sell these bonds at the indicated market prices.