i have attached a document. There are 20 questions and they are multiple choice

1. Given the following information, calculate Fund PSU's alpha: T-Bill Return: 2% S&P 500 Return: 8% Beta: 0.75 Beginning Fund Value: $15 Ending Fund Value: $18 A) -13.5% B) -5.0% C) 4.0% D) 13.5% E) 5.0% 2. Given the following information, calculate the firm's beta: Expected Return: 12% Risk Free Rate: 5% Market Return: 9% Market Risk Premium: 4% A) 1.00 B) 1.75 C) 2.95 D) 0.78 E) 3.00 3. An investor will receive a 12-year annuity of $3,000 per year. If the annual interest rate is 6.0%, what is the present value of this annuity? A) $36,000 B) $4,167 C) $25,152 D) $50,000 E) $50,610 4. Elliot makes a payment of $3,500 a year on her car. At the end of 10 years, she's paid off her initial $25,000 loan. What was her approximate interest rate? A) 4.0% B) 7.5% C) 40.0% D) 6.6% E) 21.7% 5. Your friend wants to borrow $5,000 from you and gives you three options for repayment. Assuming a discount rate of 4%, which of the following options should you choose? Option A: $1100 a year for the next 5 years Option B: $5,500 lump sum paid 3 years from now Option C: $650 a year for the next 10 years A) Option A because it is the highest net present value B) You should not lend the money because all options are negative NPV investments C) Option C because it is the highest net present value D) Option B because it is the highest net present value E) You are indifferent because they all have the same net present value 6. How much money do you need to invest today to have $55,000 in 15 years at 8.0% interest? A) $174,469 B) $9,000 C) $6,426 D) $470,771 E) $17,338 7. Big Corp. borrows $225 million at a rate of 6.75% to finance a new plant. They will fully repay the loan with annual payments in 15 years. How much will they pay in total over the 15 years to repay the loan in full? A) $225,000,000 B) $452,812,500 C) $161,789,089 D) $364,727,108 E) $389,346,188 8. Ross will inherit a lump sum amount of $700,000 that is payable in 15 years. The current rate of return is 5.5%. What is the present value of the lump sum? A) $1,562,734 B) $662,500 C) $104,182 D) $313,553 E) $49,233 9. Which of the following is true regarding interest rates? A) The effect of a change in interest rates on bond and stock prices is unknown. B) Increases in interest rates lead to increases in bond prices. C) Increases in interest rates lead to increases in stock prices. D) Interest rates do not affect stock or bond prices. E) Increases in interest rates lead to decreases in bond prices. 10. Mary plans on retiring in 30 years by purchasing a house on the coast. He estimates he will need $850,000 saved at that time and is starting now. What payment would Mary need to make yearly into a savings account with a tax-rate of 30% and an average market return of 7.5%? A) $28,333 B) $8,483 C) $944 D) $8,221 E) $12,254 11. Calculate the firm's expected return using the capital asset pricing model: Risk Free Rate: 5% Market Return: 8% Beta: 1.3 Standard Deviation: 7% Debt Equity Ratio: 40% A) 14.9% B) 4.2% C) 13.6% D) 4.56% E) 8.90% 12. Diane took out a $280,000 home mortgage with 9.5% interest rate and equal annual payments. How much will she have to pay annually to repay the loan in 15 years? A) $18,667 B) $35,768 C) $26,600 D) $4,785 E) $2,616 13. If a stock has a beta of 2, what can one infer about the expectations of that stock relative to the market? A) The stock's expected return is equal to that of the market. B) The stock is less risky than the market. C) The stock is as risky as the market. D) The stock will tend to have movements equal to the market. E) The stock will tend to double market movements, both up and down. 14. Which of the following is true? A) A positive NPV means that the present value of future cash flows are less than the amount invested B) The payback period adjusts for the risk of an investment C) A positive alpha means that a firm's actual return was lower than it's expected return D) If the NPV of an investment is positive, the IRR of the investment is less than the discount rate E) The higher the discount rate, the lower the NPV of an investment 15. State College LLC recently bought a piece of machinery for $25 million and expects cash flows generated from the investment in the next three years to be: $10 million, $14 million, and $12 million. Using a discount rate of 8%, calculate the NPV of the investment (rounded to the nearest million). A) $6 million B) $11 million C) $37 million D) $28 million E) $36 million 16. How much interest would you pay if you bought a car for $28,000 that was fully financed with a 6.5% auto loan that lasted 6 years (assuming that you make payments annually)? A) $10,920 B) $7,023 C) $5,784 D) $6,703 E) $1,820 17. Upon graduating from Penn State, Christian has $52,800 worth of student loans with an interest rate of 7.50%. How many years must the loan be if his annual payment budget is $9,000? (rounded to the nearest number) A) 12 Years B) 10 Years C) 6 Years D) 5 Years E) 8 years 18. If you took out $260,000 mortgage loan to be repaid over 25 years at 6.5%, calculate the amount of principal reduction in the first year. A) $9,512 B) $8,836 C) $4,415 D) $16,900 E) $21,315 19. Initech invests in a new plant for $140,000. The investment is expected to generate cash flows in the next 3 years of: $30,000, $55,000, and $80,000. Given a discount rate of 9.0%, calculate the IRR of the project. A) 7.5% B) 9.0% C) 11.1% D) 13.6% E) 16.6% 20. Given the following annual returns for Stock ABC, what does a $1,000 investment grow to over the 5year period? Year 1: 15% Year 2: 20% Year 3: 30% Year 4: -25% Year 5: 10% A) $2,000 B) $1,100 C) $1,500 D) $2,467 E) $1,480 21. Given the following information, in which order would you choose the following projects based on the profitability index? Project A (NPV of cash flows: $90,000, Investment Cost: $50,000) Project B (NPV of cash flows: $100,000, Investment Cost: $80,000) Project C (NPV of cash flows: $170,000, Investment Cost: $110,000) A) Project C, Project A then Project B B) Project A, Project B then Project C C) Project A, Project C then Project B D) Project C, Project B then Project A E) Project B, Project C then Project A 22. Gray LLC is investing is considering investing in a project that will cost $90,000 and will generate $20,000 in cash flows for the next 7 years. Assuming a Discount Rate of 10%, which of the following is true? A) All of the above are true B) The project's profitability index is 0.67 C) The project's payback period is 6 years D) The project's IRR is 12.5% E) The project's NPV is $11,275 23. Which of the following is NOT true about IRR as an investment rule? A) IRR is the discount rate that makes the NPV of an investment equal to zero. B) Invest if IRR is less than a predetermined rate of return. C) Reject the project if IRR is lower than a predetermined rate of return. D) IRR can be negative. E) Invest if IRR is greater than a predetermined rate of return. 24. A company's investment rule when using the calculated Net Present Value (NPV) of a project is: A) NPV is not useful in making investment decisions. B) Invest in the project only if its NPV is higher than last year's project. C) Invest in the project if the NPV is positive. D) Invest in the project only if the NPV is zero. E) Invest in the project if the NPV is negative