QUESTION 15 What is the present value of a promise to receive $100 forever, beginning next year (t-1), if the interest rate is 6% per year? O $1,600 O $1,588 O $1,667 O $1,500 QUESTION 16 0 What methods can we use to estimate the equity premium in CAPM? O All the above are valid as long as you stay consistent with your choice None of the above Historical averages Consensus survey QUESTION 19 If interest rates decrease by 25 basis points (original interest rate is 8%), what is the % price change for a 30 year zero-coupon bond with a $100 face value? O7.20% 3.45% O14,20% O14.94% There are two mutual fund managers. Manager 1 eamed 21% in the past year, whereas manager 2 eamed 11% in the past year. The beta of the first manager is 1.8, whereas the beta for the second manager is 0.9. Assume CAPM is the correct model. Which manager is a better stock selector (i.e. who performed better on risk-adjusted basis)? (hint compare the actual return with the expected return according to CAPM) O Not enough information provided Both performed equally Manager 2 Manager 1 QUESTION S What is the present value of a firm that just paid $100 this year? The annual cash flow is expected to grow at 2.5% forever and the interest rate is 6% per year. $2,929 $2,563 O $2,000 O $2,857