QUESTION 33

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

		4.0%
		6.0%
		10.0%
		14.0%

5 points

QUESTION 34

Using the data from Question 33, find the standard deviation (risk) for the stock

		11.49%
		12.59%
		13.56%
		14.56%

5 points

QUESTION 35

Construct an amortization schedule for a $1,000, 5% annual rate loan with 3 equal payments. The first payment will be made at the end of the1st year. Find the required annual payments

		$355.8
		$367.2
		$388.0
		$390.7

5 points

QUESTION 36

Based on the information from Question 35, what's the ending balance of the amortized loan at the end of the first year

		$0
		$349.7
		$388.3
		$682.8

5 points

QUESTION 37

Based on the information from Question 35 and 36, calculate the total amount of interests you should pay for the amortized loan in three years.

		$28.8
		$55.4
		$80.0
		$101.6

5 points

QUESTION 38

Find the yield to maturity (YTM) for a 10-year, 10% annual coupon rate, $1,000 par value bond if the bond sells for $1,000 currently? We assume that interest is paid on this bond annually.

		5.11%
		6.91%
		7.64%
		10.0%

5 points

QUESTION 39

Using the information from Question 38, calculate the bond's current yield.

		6.20%
		6.57%
		10.0%
		8.21%

5 points

QUESTION 40

Using the information from Question 38 and 39, calculate the bond's capital gain yield.

		-0.35%
		-1.27%
		0.35%
		0.0%

5 points

QUESTION 41

An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and $50,000 in stock B which has a beta of 0.60. The return on the market is equal to 8% and treasure bonds have a yield of 3% (r_RF). What's the portfolio beta?

		0.60
		1.30
		1.50
		1.80

5 points

QUESTION 42

Using the information in Question 41, calculate the required rate of return on the investor's portfolio

		8.0%
		10.5%
		12.0%
		13.4%

5 points

QUESTION 43

A retail store is offering a diamond ring for sale for 36 months at $128 per month. The retail price of the ring is $3,900. What is the interest rate on this offer?

		10.5%
		11.2%
		12.5%
		13.1%

5 points

QUESTION 44

You want to receive $5,000 per month in retirement. If you can earn 0.8% return per month and you expect to need the income for 30 years, how much do you need to have in your account at retirement?

		$575,128
		$589,511
		$606,323
		$638,208

5 points

QUESTION 45

A firm has issued a bond. The bond has a 12% coupon, paid semiannually, a current maturity of 20 years, and sell for $1,171.59. The firm's marginal tax rate is 40%. What's the firm's after-tax component cost of debt?

		3.0%
		5.0%
		6.0%
		12%

5 points

QUESTION 46

A firm's preferred stock currently sells for $90 per share and pays a dividend of $10 per share. However, the firm will only receive $80 per share from the sale of new preferred stock due to the floatation costs. What's the firm's component cost of Preferred stock?

		9.5%
		10.0%
		11.1%
		12.5%

5 points

QUESTION 47

A firm's common stock currently sells for $40 per share. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10% per year. What's the firm's cost of common stock using DCF approach?

		9.5%
		10.0%
		15.5%
		16.5%

5 points

QUESTION 48

A stock is selling for $50 in the market. The company's beta is 1.2, the market risk premium (r_M - r_F) is 5%, and the risk-free rate is 3%. The most recent dividend paid is D₀ = $2 and dividends are expected to grow at a constant rate g. What's the dividend growth rate g for this stock?

		3.00%
		4.19%
		4.81%
		5.0%

5 points

QUESTION 49

Using the information from Question 48, find the stock's capital gain yield.

		3.00%
		4.19%
		4.81%
		5.0%

5 points

QUESTION 50

Using the information from Question 48, find the stock's dividend yield.

		3.00%
		4.19%
		4.81%
		5.0%