Given the following information on a bond,

Par value: $1000

Interest rate: 6%

Coupon rate: 8% paid semiannually

Years to maturity: 15 years,

what is the expected price at the end of year 5?

Select one:

a. 1152.98

b. 1141.97

c. 1145.32

d. 1148.77

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"The Y variable for the security market line (SML) is the beta, and the X variable is the required rate or return." True or false?

Select one:

a. False

b. True

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"If the price of the bond is lower than the part value, the interest rate of the bond is lower than the coupon rate." True or false?

Select one:

a. False

b. True

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"Holding other factors in the Gordon model constant, if the market risk premium increases, the expected price of the stock would fall." True or false?

Select one:

a. True

b. False

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Yuyen Corporation just paid a $5 dividend per share, you expect the dividend to grow at 10% for the next 2 years and expect to sell the stock at $65 at the end of year 2. What is the maximum price you would pay to buy the stock? The required rate of return is 12%.

Select one:

a. 61.55

b. 58.33

c. 60

d. 56.08

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Given the following information on TTY Inc's preferred stock, what is the expected price in 5 years?

Risk free rate: 4%

Market risk premium: 6%

Beta of the stock: 1.2

Preferred dividend per share: $6

Select one:

a. 53.57

b. 55.87

c. 52.07

d. 54.23

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What is the present value of the following annuity payments: $500 each 6 months for 5 years at an interest rate of 10% compounded semiannually?

Select one:

a. $3,872.88

b. $3,860.86

c. $3,878.08

d. $3,882.90

e. $14,698.44

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The expected rates of return for Stocks A and B are .06 and .12 respectively. The risk free rate is .04 and the market risk premium is .08. If you invest $6,000 and $4,000 in Stocks A and B respectively, what is the beta of the portfolio? Assume that the 2 stocks are priced in equilibrium.

Select one:

a. .65

b. .45

c. .55

d. .75

e. 1

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What is the expected rate of return for the following stock?

Current stock price (V0)	10
Economic condition (i)	Good	Average	Bad
Probability (Pi)	0.5	0.3	0.2
Stock price (P1)	15	10	5
Dividend per share (D1)	2.2	2	1.5

Select one:

a. .20

b. .35

c. .70

d. .56

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You have the following information for Stock A and Stock B:

Expected rate of return:

Stock A: .15

Stock B: .08

Standard deviation:

Stock A: .60

Stock B: .40

Correlation between the two stocks: .5

If you invest $4,000 and $6,000 in Stock A and Stock B respectively, what is the standard deviation of the portfolio?

Select one:

a. .3794

b. .4157

c. .2932

d. .3210

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"For two bonds identical in every respect except the time to maturity, the price of the longer-term bond is less sensitive to the changes in the interest rate than that of the shorter bond." True or false?

Select one:

a. False

b. True

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Your portfolio contains Stocks X and Y with the following dollar amount of investments:

Stock	X	Y
Investment	$5,000	$15,000

The portfolio has a beta of 1.2. If you add Stock Z into your portfolio with an investment of $10,000, what is the beta of your new portfolio if Stock Z has a beta equal to 3?

Select one:

a. 1.6

b. 1.8

c. 1.4

d. 2.0

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"If the correlation coefficient between a stock and the market portfolio is negative, the beta for the stock is positive, and vice versa." True or false?

Select one:

a. False

b. True

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Variables X and Y have the following linear relationship:

Y=.04+.06X

If Y is .12, what is X?

Select one:

a. 1.1111

b. 1.5

c. 1.6667

d. 1.3333

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What is the monthly payment for the following mortgage?

Loan amount: $30,000

10 years to maturity

Interest rate: 12%

Select one:

a. $430.41

b. $420.03

c. $250.51

d. $425.67

e. $438.99

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Based on the following information for a bond, what is the bond's coupon rate?

Years to maturity	25
Par value	1000
Interest rate	0.1
current price	1200

Select one:

a. .1082

b. .1331

c. .1219

d. .1108

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Based on the following data for AAk stock, what is the implied growth rate? Assume that the stock is priced in equilibrium.

Dividend just paid, D₀, =$4

10-year Treasury bond yield=4%

Current market price, P₀=$80

Market risk premium=8%

Beta of the stock: 1.2

Select one:

a. 8.54%

b. 9.43%

c. 8.19%

d. 8.95%

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What is the expected price of the following bond?

Par value: $1,000

Years to maturity: 30 years

Coupon rate: 8% paid semiannually

Beta: 0.1

Assume:

Risk-free rate: 4%

Market risk premium: 5%

Select one:

a. $1,566.22

b. $1,582.07

c. $1,590.22

d. $1,573.11

e. $1,552.98

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The risk-free rate is 4%; the market risk premium is 7%. PPR Companys stock has a beta of 2. The last dividend was $4. The dividend is expected to grow at 6%. What is the expected price in four years?

Select one:

a. $47.01

b. $48.64

c. $46.87

d. $45.90

e. $44.61

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What is the expected rate of return of the following bonds?

Par value: $1,000

Years to maturity: 10 years

Coupon rate: 8% paid semiannually

Current market price: $960

Select one:

a. 9.43%

b. 8.61%

c. 8.22%

d. 9%

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"Total risk can be decomposed into firm-specific risk and market risk. Market risk is irrelevant to investors because it can be diversified away by forming a well-diversified portfolio." True or false?

Select one:

a. False

b. True

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Based on the following information:

Standard deviation of the stock: .04

Standard deviation of the stock index: .03

Correlation coefficient between the stock and the stock index: .9

what is the market risk component for the stock?

Select one:

a. .00090

b. .00140

c. .00130

d. .00110

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What is the true IRR of the following project? Assume the firm would be able to reinvest the cash flows at a 7% rate of return.

Year	A
0	-1,000
1	600
2	400
3	400

Select one:

a. 15.32%

b. 14.85%

c. 14.21%

d. 12%

e. 14.00%

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"Two stocks with the same expected dividend per share, E(D₁), and growth rate, g, must also have the same expected price, E(P₀)." True or false?

Select one:

a. False

b. True

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CCV Corporation has just paid a dividend of $4 per share, its growth rate is estimated to be 6% per year, and its stock beta is 1.4. The current 10-year Treasury bond yield is 2.5% and the market risk premium is estimated to be 8%. What is the expected price of the stock?

Select one:

a. $55.06

b. $57.43

c. $58.54

d. $56.98

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"If a stock's beta is doubled, its required rate of return would also double." True or false?

Select one:

a. False

b. True

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What is the NPV of the following project?

Year	A
0	-1,000
1	200
2	500
3	500

The WACC for the project is 10 percent.

Select one:

a. -29.30

b. 200.00

c. 19.67

d. 26.65

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Based on the following ex-post data, what is the beta of the portfolio?

Standard deviation of the portfolio: .40

Standard deviation of the market portfolio: .381

Correlation coefficient between the portfolio and the market portfolio: 1.0

Select one:

a. .95

b. 1.15

c. 1.10

d. 1.05

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Bank A pays 15% interest, compounded monthly, on its money market account. What is the effective annual rate?

Select one:

a. 16.08%

b. 17.75%

c. 11.26%

d. 15.12%

e. 14.88%

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Given the following equation:

Y=[a(1+g)/P]+g

If Y=.15, a=5, and P=50, what is g?

Select one:

a. 4.55%

b. 3.56%

c. 4.2%

d. 4%