QUESTION 31

1. A stock has the following probability distribution: If the economy is good (the probability is 20%), its expected stock return is 20%; if the economy is on average (the probability is 60%), its expected stock return is 10%; if the economy is bad (the probability is 20%), its expected return is -10%. Find the expected rate of return for the stock.

   8.0%

   6.0%

   10.0%

   14.0%

QUESTION 32

1. Using the data from Question 31, find the standard deviation for the stock.

   		9.80%
   		10.29%
   		11.35%
   		12.98%

QUESTION 33

1. Find the yield to maturity (YTM) for a 15-year, 8% annual coupon rate, and $1,000 par value bond if the bond sells for $1,208 currently? We assume that interest is paid on this bond semiannually.

   		5.89%
   		6.84%
   		7.55%
   		8.72%

QUESTION 34

1. Using the information from Question 33, calculate the bonds current yield.

   		6.35%
   		6.62%
   		7.22%
   		7.08%

QUESTION 35

1. Using the information from Question 33 and 34, calculate the bonds capital gain yield.

   		-0.39%
   		-0.56%
   		-0.73%
   		1.18%

QUESTION 36

1. An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.1, and $50,000 in stock B which has a beta of 0.6. The market risk premium is equal to 5% and treasure bonds have a yield of 3% (r_RF). Whats the portfolio beta?

   		1.60
   		1.85
   		1.50
   		1.35

QUESTION 37

1. Using the information in Question 36, calculate the required rate of return on the investors portfolio

   		8.25%
   		10.55%
   		9.75%
   		9.15%

QUESTION 38

1. A store is offering a diamond ring for sale for 60 months at $100 per month. The retail price of the ring is $6,000. What is the annualized interest rate on this offer?

   		10.51%
   		9.28%
   		7.42%
   		0%

QUESTION 39

1. You want to receive $5,000 per month in retirement. If you can earn 6% annual return and you expect to need the income for 30 years, how much do you need to have in your account at retirement (monthly compounding)?

   		$644,156
   		$589,511
   		$722,166
   		$833,958

QUESTION 40 A firm has issued a bond. The bond has a 6% coupon rate, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firms marginal tax rate is 21%. Whats the firms after-tax component cost of debt?

7.9%

5.5%

6.0%

21%

QUESTION 41 A firms preferred stock currently sells for $100 per share and pays a dividend of $11 per share. However, the firm will only receive $95 per share from the sale of new preferred stock due to the floatation costs. Whats the firms component cost of Preferred stock?

10.5%

10.9%

11.6%

12.3%

QUESTION 42 A firms common stock currently sells for $40 per share. The firms most recent dividend paid (D0) is $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10% per year. Whats the firms cost of common stock using DCF approach? 9.5%

15.0%

15.5%

16.5%

QUESTION 43 A stock is selling for $50 in the market. The companys beta is 1.2, the market risk premium (rM - rF) is 5%, and the risk-free rate is 6%. The most recent dividend paid is D0 = $2.0 and dividends are expected to grow at a constant rate g. Whats the required rate of return by common shareholders?

5.0%

6.0%

11.0%

12.0%

QUESTION 44 Based on the information from Question 43, whats the dividend growth rate g?

6.22%

7.31%

7.69%

8.15%

QUESTION 45 Based on the information from Question 43 and 44, calculate the stocks expected dividend yield.

4.31%

5.00%

6.22%

7.70%

5 points

QUESTION 46 A companys free cash flow FCF0 = $1.2 million. The weighted average cost of capital is WACC = 10.1%, and the constant growth rate is g = 5%. What is the current value of operations?

$19.5 million

$21.8 million

$24.7 million

$25.6 million

QUESTION 47 A firms free cash flow in Year 1 is $2.5 million. If the expected long-run free cash flow growth rate for this company is 5%, the weighted average cost of capital is 11%. The company has $5 million in short-term investments and $3 million in debt, and 2 million shares outstanding, what is the estimated intrinsic stock price?

$16.83

$18.57

$25.33

$28.59

QUESTION 48 Construct an amortization schedule for a $1,500, 6% annual rate loan with 3 equal payments. The first payment will be made at the end of the 1st year. Find the required annual payment.

$355.2

$467.3

$388.0

$561.2

QUESTION 49 Based on the information from Question 48, whats the ending balance of the amortized loan at the end of the 2nd year.

$0

$529.4

$388.3

$561.

QUESTION 50 Based on the information from Question 48 and 49, calculate the total amount of interests you should pay for the amortized loan in three years.

$168.3

$175.8

$183.5

$164.1